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Thursday, July 18, 2019

ANALYSIS/OPINION:

Does importing renewable fuel from overseas put America first?

It is hard to argue in the affirmative, and yet, despite the Trump administration being on pace to make the United States a net exporter of energy, it has occurred frequently in the United States over the years because of the high compliance costs associated with the Renewable Fuel Standard (RFS). 


Created in 2005 and expanded in 2007, the RFS mandates that America’s fuel supply contains a minimum quantity of biofuels, such as ethanol, a fuel additive typically produced from corn. The fear at the time was that America was overly reliant on foreign oil and that diluting the mixture with ethanol would create more to go around, preventing the need to import from abroad.

The trouble for many small refiners is that blending ethanol is expensive, particularly for the ones that many of my former constituents work at in Pennsylvania. It costs some Pennsylvania refiners half a million dollars a day to fulfill the RFS’ obligations, their most significant business expense after crude oil and amounting to double payroll costs. 

Complying with the ethanol mandate is costly to the point that many refiners import renewable mixtures from overseas, rather than create the blends themselves, to remain compliant with the law. Put another way, the RFS — the law created to prevent foreign oil dependency — has, in some respects, created reliance on renewable fuel imports instead. If new legislation passes through Congress, it will only get worse.

New legislation introduced in the U.S. Senate in June, called the RFS Integrity Act, would drastically reduce the number of hardship waivers, known as small refinery exemptions (SREs) granted by the EPA.

Ever since the creation of the RFS, EPA has, to help mitigate the damage, issued SREs to the small refiners most in need. 

To receive a waiver, a refinery must produce less than 75,000 barrels per day and petition the EPA, outlining in its filing how compliance would impose a “disproportionate economic impact” on them. In consultation with the Department of Energy (DOE), the EPA reviews each petition on a case by case basis and, when appropriate, provides much-needed relief that helps to keep many of these important refiners afloat.

Now, however, according to the Advanced Biofuels Association (ABFA), the bill must be passed because the EPA has been disbursing them without regard to what the RFS permits. 

Ethically, it is unfounded even to argue that refiners experiencing significant harm as a result of government mandates should not receive some semblance of regulatory relief. Nevertheless, does the argument of the ABFA and its congressional backers — that the EPA has been granting hardship waivers without justification — have legal merit? 

Per a U.S. D.C. District Court in May, the answer is no — the EPA has every right to protect refiners facing costs from the RFS that are higher than the industry average, and its characterization of “disparate economic hardship” is consistent with the guidance given to it by the DOE. It is hard to imagine that the ABFA or anyone else could interpret the law in any other way. After all, should the ethanol mandate be allowed to wipe away northeastern refiners, it would cut completely against the grain of the core mission of the RFS — to ensure America’s energy dependency. 

While they may not have grasped the full extent of the RFS’ unintended consequences, the law’s creators knew from the beginning that it could pose unsustainable harm on small refiners across the country. That is why they introduced the idea of providing SREs to those who face disproportionate economic hardship from the ethanol mandate themselves: To fend off the very foreign dependency that the RFS was created to prevent.

While sharply reducing the number of SREs granted may stimulate more business for the ethanol industry, it would threaten to bankrupt scores of small refiners, increase imports from overseas, and eliminate thousands of more U.S. jobs. What’s more, the expectation that the Trump administration will make the United States a net energy exporter could fizzle out of reach.

Government mandates have already made the United States overly reliant on foreign countries’ renewable energy markets, and passing new laws will only make matters worse. As such, the RFS Integrity Act should be rejected outright. 

• Ryan Costello, a former Republican U.S. representative from Pennsylvania, was a member of the House Energy and Commerce Committee.


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