May 4, 2017
By Brian Jennings
Enactment of the Renewable Fuel Standard in Congress did more than save money at the pump and clean up the air for consumers, it also helped boost demand for U.S. corn and soybeans which, in turn, increased prices received by American farmers. By every measure, increasing the production and use of homegrown renewable fuels has spurred economic growth for U.S. farmers and supported high-skill, high-wage jobs in rural communities.
When the use of renewable fuels is curbed, the opposite is true. Starting in 2013, economic insecurity spread across rural America because the Environmental Protection Agency took implementation of the RFS off-track, reducing annual renewable volume obligations (RVOs) below levels established by Congress. During this period, EPA sided with oil companies that claimed infrastructure constraints and the mythical E10 “blend wall” prevented higher ethanol blends, such as E15 and E30, from being used in the marketplace. As a result, leading biofuel groups were forced to sue the Obama administration’s EPA. This litigation is ongoing and oral arguments were held last week by the U.S. Court of Appeals for the District of Columbia. A court decision is expected later this year.
The timing of EPA’s mismanagement of the RFS was awful and the consequences have been worse. While EPA was riding the brakes on the RFS, the productivity of American farmers led to record-high corn crops in 2015 and 2016. Supplies grew while demand and farm income fell. According to the United States Department of Agriculture, surplus stocks of corn will swell to a 30-year high of 2.4 billion bushels and corn prices will fall to a 10-year low in 2017. Liquidity ratios and working capital have deteriorated to their weakest levels since 2002 and the value of farm sector assets is expected to decline by $32 billion in 2017. Farm debt is mounting and will represent about 20 percent of farm income this year. The share of farm loans that are delinquent is creeping up and reports of farm auctions have been on the rise.
Net farm income has dropped from $124 billion in 2013 to an expected $62 billion in 2017, a decrease of nearly 50 percent since EPA took the RFS off-track. As some will remember, similar conditions forced Congress to authorize yearly ad hoc economic emergency disaster payments to farmers between 1999 and 2002 and required additional spending of $73.5 billion in the 2002 Farm Bill to avert economic collapse in rural America. It was enactment of the RFS in 2005 that restarted the rural economy and allowed farmers to profit from the free market versus relying so heavily on government payments. The lesson learned is that increasing the demand for renewable fuels leads to higher market prices for farmers and reduced taxpayer spending on farm program payments.
Growing the renewable fuels market in 2017 is even more critical given the uncertainty created by efforts to renegotiate existing trade pacts. While we are hopeful that these new negotiations will lead to better trade opportunities, the uncertainty in the near term will impact the U.S. farm economy which makes a strong and growing market for ethanol-blended fuel even more important.
To restore badly needed economic security to rural America, EPA and Congress should take a number of steps. First, Congress must reject any attempt to reduce or repeal the RFS. To get the RFS back on track, the Trump administration needs to make good on its campaign promise to set and keep RFS volumes at statutory levels. Likewise, EPA Administrator Scott Pruitt needs to follow through on the statement made during his confirmation hearing “to honor the intent of the RFS statute…, use RFS waivers judiciously, and honor RVO timelines.”
Second, legislative or regulatory action must be taken so E15 and higher blends of ethanol have access to the market. Retailers want to sell E15 in the summer months because the fuel is less emitting and lower cost than E10 and straight gasoline, but EPA’s current interpretation of its Reid vapor pressure (RVP) rule handcuffs them. This RVP regulation is the most burdensome hurdle preventing more immediate growth of E15 use nationwide. Bipartisan legislation is pending in Congress to fix this problem and EPA has options at its disposal to make a commonsense regulatory change that would allow consumers to have access to E15 and other lower cost fuels that improve air quality. Action needs to be taken soon.
A third hurdle impeding the use of higher ethanol blends is the mountain of EPA red tape over the approval process for new certification fuels and the registration of those fuels. EPA needs to streamline its fuel petition process and eliminate unreasonable criteria for approval of high-octane fuels, such as E25-E40, that currently discourages innovation and obstructs the ability for new efficient high-octane fuels to compete in the marketplace.
Read the original story: Renewable Fuels Are Part of an ‘America First’ Energy Plan