As the manufacturers of farm machinery grapple with the implications of tariffs on imported steel and aluminum, what is shaping up to be an equally significant battle is the potential implications of changes to the Renewable Fuel Standard.
The National Corn Growers Assn. (NCGA) has been leading the charge in resisting the oil industry’s ongoing pressure to alter the RFS. In a March 1 statement, North Dakota farmer Kevin Skunes, president of the NCGA, responded to White House meetings aimed at reaching a compromise to proposed changes to the Renewable Fuel Standard.
Skunes said, “For corn farmers, the question for the ongoing White House discussions is simple — what is the problem you are trying to solve? According to EPA, refiners don’t have a problem.
“EPA concluded in November that refiners are able to recover the cost of RINs through the prices they receive for refined products and that RIN values are not causing economic harm to refiners. "For farmers, ethanol blending equals corn demand. Farmers care about RIN values, not because we want them to be high, but because we want the RIN market mechanism to work freely to incentivize blending. Increased blending will, in turn, lower RIN values, exactly the way the RFS is intended to work. Government manipulation of the RIN market, on the other hand, disrupts the incentive to blend.”
Commenting on an analysis by economists at Purdue University of the potential impact of altering the RFS on agriculture, Skunes said, “The new Purdue University analysis continues a drum beat of data that makes it very clear messing with the Renewable Fuel Standard, and specifically manipulating the Renewable Identification Number (RIN) system, is a potential economic disaster for farmers and rural America.”
“A RIN price cap — even when paired with RVP parity for E15 and higher blends — weakens the RFS and would prevent achievement of the clean air and economic objectives that launched this innovative, renewable fuels program.
“Purdue University notes, artificially capping RIN values or otherwise manipulating the RIN system with waiver credits would reduce overall biofuel blending, halt investment in higher ethanol blend infrastructure and drive some domestic ethanol plants out of business. When combined with recent analysis from Center for Agricultural and Rural Development (CARD) at Iowa State University and the Environmental Protection Agency’s (EPA) conclusion that RIN values do not impact refiners, the picture gets crystal clear; there is no logical reason to tinker with this program that is working.”
The Iowa State study concluded that:
• A leading Renewable Fuel Standard reform proposal considered by policymakers would allow E15 (fuel containing 15% ethanol) sales throughout the year and implement a cap on D6 RIN prices between $0.10 to $0.20/RIN.
• While year-round sales of E15 would encourage retailers to sell the fuel, capping D6 RIN prices would reduce consumption of E15 and E85.
• A cap on D6 RIN prices between $0.10/gal to $0.20/gal would likely reduce the effective ethanol mandate from 15 billion gallons to about 14.3 billion gallons in 2018.
• Unless increased ethanol exports compensate for the reduced mandate, corn prices would decrease under the proposal’s D6 RIN price cap.