WASHINGTON, D.C. – In its first hearing held on the Renewable Fuel Standard since 2016, the U.S. Senate Environment and Public Works committee listened to testimony Feb. 16 from witnesses both for and against the measure.

According to the U.S. Department of Energy, “The Renewable Fuel Standard (RFS) is a federal program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. 

“The RFS originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007 (EISA). The RFS requires renewable fuel to be blended into transportation fuel in increasing amounts each year, escalating to 36 billion gallons by 2022. Each renewable fuel category in the RFS program must emit lower levels of greenhouse gases (GHGs) relative to the petroleum fuel it replaces.”

Last December, the EPA released a proposal denying more than 60 pending exemption petitions of small refineries filed between 2016 and 2021.

“I spent the entirety of my 30-year career representing the petroleum-refining industry, and particularly small refineries,” LeAnn Johnson Koch, an attorney with Perkins Coie, LLP, in Washington, D.C., told the committee.

“I know their companies,” she added. “I know their people. I know their communities, and now I also know the very real threat they face as a result of the EPA’s proposal to end small refinery hardship.”

She said if the EPA finalizes the proposal, small refineries, which produce 75,000 barrels or less per day, would be required to have renewable identification numbers, or RINs.

She added this would also require small refineries to either blend biofuels with petroleum or buy renewable identification number credits to comply.

“The U.S. Environmental Protection Agency (EPA) uses Renewable Identification Numbers (RINs) to track renewable transportation fuels,” according to the U.S Department of Energy. “The RIN system allows EPA to monitor compliance with the Renewable Fuel Standard (RFS). Any entity blending ethanol and gasoline may sell RINs to one another. As a hypothetical example, Refiner A has already fulfilled its annual RFS requirement, but continues to buy and blend renewable fuels and, therefore, has excess RINs. Refiner A can sell the excess RINs to Importer B, who has not purchased sufficient renewable fuels to meet its RFS requirement. RIN prices are determined by market factors typical of other commodities.”

“They now intend to deny them retroactively, causing small refineries to enter the market to buy (renewable identification numbers) at their near-record highs,” Koch said.

U.S. Sen. Tom Carper, D-Delaware, who chairs the committee, said, “the huge price swings in renewable identification number costs from 30 cents to almost $2 per gallon of renewable fuel in less than two years have created financial uncertainty for just about everybody – especially those who are required to comply with the Renewable Fuel Standard.

“That, in turn, has made it extremely difficult for obligated parties to make investments in producing cleaner fuels,” he said.

U.S. Sen. Shelley Moore Capito, R-WV, ranking member on the committee, said “I’m concerned that this volume obligation is going to raise costs at a time where gasoline is at its high in and of itself, impacting American consumers in the economy.” 

“Second, the EPA also announced a proposal to deny all pending small-refinery exemptions, which provide critical relief to small refineries experiencing financial hardship that is imposed by the Renewable Fuel Standard program,” she added. “This action runs counter to the congressional intent.”

However, Emily Skor, Growth Energy CEO in Washington, D.C., told the committee the Renewable Fuel Standard has “consistently been undermined” since 2013 through the abuse of waivers, small-refinery exemptions, and compliance deadline extensions.

“Most of these administrative actions have been to appease the unfounded claims of a select few looking to subvert the Renewable Fuel Standard, slowing progress on carbon reductions,” she said.

“Don’t be fooled,” she added. “The Renewable Fuel Standard does not harm refiners. Three administrations and the courts have affirmed this. Claims to the contrary are just a smokescreen to divert attention away from available and affordable American energy.”

But U.S. Senator Joni Ernst, R-Iowa, a committee member, said it has more to do with the price of crude oil, which had the average closing price of crude oil in 2020 of nearly $40 per barrel, with the average price in 2022 so far at nearly $86.

“The Renewable Fuel Standard was created to help reduce America’s dependence on foreign nations,” she said. “I firmly believe energy security is national security.

“In my rural areas, ethanol is also the cheapest form of fuel for consumers right now by about 50 cents,” she said. “And certainly, with record-high inflation, it only makes sense to make this fuel source more readily available.”

“I think a point our members are trying to make today is the cost of fuel is because of the Renewable Fuel Standard,” she said. “It’s not. It’s about the price of oil. So, I reject that.

“So, we’ve had the Renewable Fuel Standard for a number of years, and the reason we have is because Congress asked for the Renewable Fuel Standard to be established so that we could reduce our greenhouse gas emissions,” she added. “Folks across the Midwest, our farmers, our producers, responded to the call to Congress, and they developed systems that produce clean, reliable energy sources.”

She said between 2008 and 2020, the Renewable Fuel Standard saved nearly 1 billion metric tons of carbon dioxide, and “it’s only getting cleaner,” citing the latest research showing corn ethanol is “46 percent less carbon intensive than petroleum-based gasoline, and biodiesel is 74 percent less carbon intensive than petroleum-based diesel.”

“Folks, the Renewable Fuel Standard is the law, and refiners have had over 15 years to come into compliance,” she said. “Blend renewable fuels or buy renewable identification numbers; it’s your choice. Any claim that renewable identification number prices are increasing gas prices is a bunch of hogwash.

“Refiners claim they need exemptions because renewable identification numbers cost them money,” she added, “but the last three administrations have said renewable identification number prices do not cause harm to refiners.”

She said, “As much as the Biden administration dreams of an all-electric world, the reality is liquid fuels are here to stay.”

Lucian Pugliaresi, president of the Energy Policy Research Foundation, Inc., in Washington, D.C., said he agreed that the cost of crude oil is increasing gas prices, but that “there are other components in the manufacturing of transportation fuel.”

He called on the U.S. Energy Information Administration to examine the issue so both sides in the Renewable Fuel Standard debate could have the same data.

“We should try to do a better job of getting a common set of facts,” he said.