The Renewable Fuels Association thanked a bipartisan group of 32 Members of the U.S. House of Representatives for calling on President Trump to reject so-called “gap-year” refinery exemptions under the Renewable Fuel Standard.
“The Trump Administration has now heard from Members of the House, Senators and Governors on this important issue for rural America,” said RFA president and CEO Geoff Cooper. “Even the Environmental Protection Agency itself has noted there are significant ‘issues’ with these waivers, and we urge a speedy denial of these attempts by the oil industry to circumvent federal law and the recent court decision limiting waivers to extensions of ones previously received.”
Cooper noted that, on June 25, a bipartisan group of 16 U.S. Senators called on EPA to reject the waivers, and on June 29, members of the Governors’ Biofuels Coalition urged EPA to do the same.
The idea of retroactive refinery exemptions follows a recent decision by the Tenth Circuit Court of Appeals that rejected a set of waivers granted by EPA that were not simple extensions of prior waivers. The lawsuit was brought against EPA by RFA, the National Corn Growers Association, National Farmers Union and the American Coalition for Ethanol.
Seeking to circumvent this court decision, several refineries have now applied for retroactive waivers for years in which they did not originally request or receive waivers. On June 18, EPA disclosed that 52 new petitions had been received, covering the compliance years 2011 through 2018. In late May, RFA was the first to urge Wheeler to deny any gap-year waivers that came forward.
“The RFS has been a tremendous success, providing a critical value-added market for our farmers, lowering the price of fuel for consumers, and improving air quality across the nation,” the Members of the House wrote in today’s letter. “The EPA’s repeated efforts to undermine the RFS with waivers, SREs, and tepid annual volume requirements continue to undermine the future potential of our local farmers and biofuels producers.”
Sioux Falls, SD – The American Coalition for Ethanol (ACE) CEO Brian Jennings today expressed his disappointment in the Environmental Protection Agency (EPA) for taking no action to follow through on ACE’s request to issue an interim final rule by July 1 to increase the Renewable Volume Obligation (RVO) for 2020 to the percentage necessary to ensure that the full 20.09 billion gallons required by the Renewable Fuel Standard (RFS) are used due to the unanticipated drop in ethanol blending as a result of the coronavirus pandemic.
This was one of three immediate steps Jennings outlined in an April 3 letter to EPA Administrator Andrew Wheeler that also urged the Agency to restore the 500 million gallons of remanded volume as ordered by the DC District Court in 2017 and nationally apply the Tenth Circuit Court precedent regarding small refinery exemptions by denying most of the pending waivers for the 2019 RFS compliance year. The Agency not only has the authority to take these steps but must take them to avoid being in violation of the RFS statute which specifically instructs EPA to set the total RVO at a level that ‘ensures the requirements’ of the statutory obligations are met. Jennings issued the statement below following ACE’s July 1 requested deadline:
“When I wrote EPA in early April, it was evident ethanol demand was heading for trouble, so we spelled out three immediate steps existing law or court decisions allowed EPA to take to help cushion the blow. Nearly three months have passed on our requests and it appears the only action EPA has taken is to entertain 52 ‘new’ retroactive waiver requests for refiners suddenly claiming economic hardship dating back nearly a decade in RFS compliance years.
“We can add this to the list of letdowns coming from the Agency with so many opportunities at its disposal to get the RFS back on track.”
South Dakota Governor Kristi Noem and Minnesota Governor Tim Walz sent a letter to Andrew Wheeler, Environmental Protection Agency Administrator regarding small refinery exemptions. They’re asking the agency to reject all of the 52 applications for retroactive small refinery exemptions from the Renewable Fuels Standard for past compliance years.
Governor Noem and Governor Walz are the chair and vice-chair of the Governors’ Biofuels Coalition. “We are concerned that EPA is considering exemptions for prior years that were specifically submitted to evade the court of appeal’s decision by allowing refineries with lapsed SREs to establish a continuous chain of exemptions,” the governors say. “Approving prior-year SREs in this manner ignores the court’s decision and congressional intent, and it will severely impact farmers and rural communities that support the biofuels industry.
Since 2017, the EPA has granted 85 SREs, undermining farmers and biofuel producers throughout the nation.” In January, the U.S. Court of Appeals in the Tenth Circuit ruled that the EPA could not legally award exemptions to refiners that didn’t receive any waivers in previous years and had failed to demonstrate hardship in any way related to the RFS. If all 52 applications get approved, the coalition says it will cost the market more than two billion gallons worth of demand.
A new report from CoBank’s Knowledge Exchange says the ethanol industry may have to diversify itself in the future. The report says excess production capacity and reduced demand will force the U.S. ethanol industry to “transform its business model to create more value and improve its operational efficiency.”
CoBank predicts that consolidation within the industry will lead to larger and more financially stable companies with diversified ethanol co-product offerings by 2025. “While ethanol remains an attractive business with long-term potential, the industry will need to evolve and diversify beyond fuel ethanol,” says Kenneth Zuckerberg, CoBank lead grain and farm supply economist. “That diversity will need to include higher-margin co-products like high protein distillers’ grains for animal feed, liquid carbon dioxide for refrigeration, beverage grade alcohol, and other industrial products.
COVID-19 led to businesses shutting down and people staying at home, causing significant ethanol demand destruction. The industry had one billion gallons of excess capacity at the start of 2020, with that number projected to rise to 3.9 billion at the end of this year before it settles to 2.4 billion at the end of 2021. Strong export growth would help reduce the excess, but current projections don’t support such an outcome.
Farm Partners Topics Discussed: – The current state of the corn/soybean market – Pressure from South America for the soybean crop – Safrinha corn crop condition – Spring bounce for row crops – corn/soybean export pace – Ethanol demand – Bottom Line: What will it take for the markets to move higher from here?
The Friday conversation with Jeff Peterson of Heartland Farm Partners. This weeks WASDE report, export demand, weather market & what will it take to move markets.
PJ Conradt with Tredas joins Susan Littlefield this week to talk exports, weather, pressure from Brazil & China will also weigh into the trade week. Summer is here & that will help the ethanol market.
Higher grains wrap up a Thursday trade. Ethanol margins continue to stabilize while warmer drier weather is starting to factor into the trade. Export sales for the week considered “ok” and the dollar trades lower again. A look at the basis in the country and all the Dicamba talk surround the ag industry today.
How does the corn and soybean markets look to you this time?
Are the funds playing much of an impact in the corn and soybean markets at this time? How is the demand for corn in the ethanol industry looking? What does feed demand look like to you?
How are corn exports looking? Why is China buying soybeans from Brazil when our soybeans are cheaper? Do you think we have seen a bottom in the corn market? If you have old crop and new crop corn, would you sell here?
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