Trump at the Renewable Pump: will he bump, thump or dump?

February 23, 2017 |

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Trump Reiterates Support for Ethanol, RFS” is the major headline to come out of the National Ethanol Conference in San Diego, which is the Renewable Fuels Association’s annual conflab and as usual produced a flurry of studies, keynotes and statements on the viability and importance of US ethanol to everything from American jobs to advanced American manufacturing.

The Trump headline came out of a letter sent to the delegates to the event by President Trump — which itself is a hopeful sign of support.

But did the President really offer support for the Renewable Fuel Standard? Let’s look at the letter behind the headlines.

“Rest assured that your president and this administration values the importance of renewable fuels to America’s economy and to our energy independence. As I emphasized throughout my campaign, renewable fuels are essential to America’s energy strategy,” Trump wrote.

“As important as ethanol and the Renewable Fuel Standard are to rural economies, I also know that your industry has suffered from overzealous, job-killing regulation. I am committed to reducing the regulatory burden on all businesses, and my team is looking forward to working with the Renewable Fuels Association, and many others, to identify and reform those regulations that impede growth, increase consumer costs, and eliminate good-paying jobs without providing sufficient environmental or public health benefit,” Trump added.

Hmm. There’s support for renewable fuels in there. President Trump reiterates that “renewable fuels are essential to America’s energy strategy,” but when it comes to the RFS itself, the President notes the importance of the Renewable Fuel Standard to rural communities — and then quickly pivots to a theme of identifying and reforming “those regulations that impede growth, increase consumer costs, and eliminate good-paying jobs without providing sufficient environmental or public health benefit.”

Now, the President could have written a letter to the Affordable Healthcare Society attending at the National Conference to Save Obamacare with the following:

“As important as Obamacare is to low-income people, I also know that your industry has suffered from overzealous, job-killing regulation. I am committed to reducing the regulatory burden on all businesses, and my team is looking forward to working with the Affordable Healthcare Society, and many others, to identify and reform those regulations that impede growth, increase consumer costs, and eliminate good-paying jobs without providing sufficient environmental or public health benefit.”

It sounds very supportive, but it’s a long way from a pledge to defend Obamacare. And we’ve changed nothing in the structure, just the names.

Nevertheless, the Renewable Fuels Association was grateful.

“We thank President Trump for reaffirming his support for the domestic biofuels industry and the RFS,” said RFA President and CEO Bob Dinneen. “The RFS has cleaned the air, reduced our dependence on foreign oil and boosted local economies. Donald Trump understands all this. Consumers benefit from this national policy and our industry looks forward to continuing to be the lowest cost, highest octane fuel in the world.”

Here’s the letter, below.

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$42B in market impact

The RFA debuted a new study by ABF Economics. which found that the U.S. ethanol industry added $42.1 billion to the nation’s gross domestic product and supported nearly 340,000 jobs in 2016.

According to the analysis, the production and use of 15.25 billion gallons of ethanol last year also:

•contributed nearly $14.4 billion to the U.S. economy from manufacturing;

•added more than $22.5 billion in income for American households;

•generated an estimated $4.9 billion in tax revenue to the Federal Treasury and $3.6 billion in revenue to state and local governments;

•displaced 510 million barrels of imported oil, keeping $20.1 billion in the U.S. economy;

Record sales for ethanol producers

In all, it’s been a strong year for ethanol. Dinneen said in his keynote that 2016 was “a record year for production, a record year for net exports, a record year for domestic demand, and a record year for E15 sales and infrastructure build-out. It was, in short, a pretty darn good year,” said Dinneen.

Overall, he noted that the industry produced a record 15.3 billion gallons of ethanol in 2016, while supporting 74,420 direct jobs and 264,756 indirect and induced jobs across the country.

Dinneen also predicted that the Trump Administration would “stand up for American trade, and fight back against any trade distorting tariffs, such as those recently imposed by the Chinese on U.S. ethanol and dried distillers grain exports.”

The 2017 US Ethanol Outlook

How much U.S. ethanol was produced last year? What were the top U.S. ethanol export markets? What are ethanol’s environmental and octane benefits? How many states offer E15 (15 percent ethanol) blends and how many automakers warranty their vehicles for higher ethanol blends? The answer to these questions and many more is simple, says the RFA — it’s in the 2017 Ethanol Industry Outlook, and that’s here.

Shifting the Point of Obligation

One of the issues in the mix for the ethanol industry right now is a fight over “the point of obligation” in the Renewable Fuel Standard. Right now, that’s oil refineries. Carl Icahn and others have been urging the White House to shift the point of obligation to retailers and fuel distributors— and a coalition of independent oil marketers, convenience store chains, travel plazas and truckstops, and ethanol producers has assembled to fight the change.

NATSO, representing more than 1,500 travel plazas and truckstops nationwide, opined: “changing the point of obligation would hinder the program’s objective of displacing traditional fuel and replacing it with renewable substitutes to promote stable supply and prices, and inject such massive disruption and uncertainty into fuels markets that retail fuel prices will inevitably skyrocket and the incentive for fuel marketers to integrate renewable fuels into their product lines will dissipate. This will crush the very constituencies whose interests President Trump promised protect in order to benefit a narrow segment of the refining industry.”

Growth Energy delivered an economic analysis commissioned from Edgeworth Economics that identifies numerous problems associated with changing the Renewable Fuel Standard (RFS) point of obligation. Growth Energy strongly supports EPA’s proposed denial to move the point of obligation.

“Changing the point of obligation would have a disastrous impact on the industry, retailers, and consumers,” Growth Energy CEO Emily Skor said.

Shifting the burden of proof on high-ethanol blends

Also appearing this week from the The Urban Air Initiative and several partners were filed comments with the Environmental Protection Agency (EPA) that disrupts the agency’s current rationale for controlling ethanol blends under the Clean Air Act, in response to the proposed Renewables Enhancement Growth Support Rule (REGS Rule).

The proposed rule would codify EPA’s position that fuel blends with more than 15% ethanol (E16-E83) may only be used in Flex Fuel Vehicles (FFVs). UAI argues that the Clean Air Act does not forbid the use of midlevel gasoline-ethanol blends in conventional vehicles.

UAI points out that under the Clean Air Act, EPA bears the burden of showing that ethanol contributes to harmful emissions before it may limit the concentration of ethanol in fuel. The proposed rule reverses this burden of proof and subverts the intent of Congress by requiring fuel manufacturers to show that higher levels of ethanol would not harm emissions control systems.

In its comments, UAI takes on EPA’s longstanding assumption that the Clean Air Act’s “substantially similar” (sub-sim) law allows the agency to control the concentration of ethanol in gasoline. UAI argues that EPA’s interpretation of the sub-sim law is inconsistent with the clear language of the law and must change.

“We believe these comments can be potentially game changing in the way the EPA regulates clean burning ethanol,” said UAI President Dave Vander Griend.

Several other organizations joined UAI’s comments. They include the Energy Future Coalition, Clean Fuels Development Coalition, Glacial Lakes Energy, Siouxland Ethanol, ICM Inc., Nebraska Ethanol Board, National Farmers Union, South Dakota Farmers Union, Minnesota Farmers Union, Montana Farmers Union, North Dakota Farmers Union, and Wisconsin Farmers Union.

The Bottom Line

One thing you’ll note in the ethanol industry’s line of discussion — it remains the ethanol industry, only loosely allied with the renewable fuels industry as a whole. Further, we see a shift from RFA — and almost everyone else promoting renewable fuels on Capitol Hill – from discussing the greenhouse gas benefits of renewable fuels to the domestic jobs and energy security that flows from US-based fuel production.

But, that said, times are good and we’ll see about 2018.

Focal point ahead? For RFA, the focus is clearly on E15. There’s quite a bit of work to be done with engine manufacturers who might incorporate E30 blends in a new generation of engines designed to reach the 52MPG CAFE standards that are proposed for the 2020s and 2030s.

Those worthy goals are far more in the background as the ethanol industry continues to focus on a E15 tolerance that would boost the potential for ethanol blending well above 20 billion gallons.

 

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