Continuing our series on the ethanol industry’s economic footprint in each of Minnesota’s congressional districts, we head over to fourth congressional district, which includes St. Paul and its suburbs such as Woodbury, Roseville, White Bear Lake, Stillwater, Arden Hills, Oakdale and Maplewood.

Renewable Fuels Association

March 1, 2018

By Emily Druckman

A new analysis issued by University of Illinois economist Scott Irwin finds that the impact of a 10-cent cap on RIN prices, as proposed by Texas Sen. Ted Cruz, would be “catastrophic” for the Renewable Fuel Standard (RFS) and “would have large impacts on biofuels in the U.S.” Specifically, such a price cap would serve as the mortar in the oil industry’s attempt to rebuild the “blend wall.” Irwin finds that “…the RINs price cap would remove all incentives for blending E15 and E85” and would be equivalent to “waiving…the conventional ethanol mandate down to the level of the E10 blend wall.”

Meanwhile, the analysis finds that if “…ethanol usage could be pushed up just a few hundred million gallons, …D6 [conventional biofuel RIN] prices would naturally fall to just a few cents. An RVP waiver for E15 might just do the trick.” Still, Irwin finds that the biofuel and agricultural industries would be the losers in any “deal” that exchanges an E15 RVP waiver for a 10-cent RIN price cap. “Agricultural and biofuels interests will find this tradeoff distinctly unappealing, while refining interests will tend to have just the opposite reaction,” he said.

Addressing the myth that RIN prices can somehow be capped without destroying the efficacy of the RFS program, Irwin writes, “…the RINs price and the mandate level are directly related–one cannot be changed without changing the other. Stated differently, reductions in the volume mandates will reduce the RINs price, or reductions in the RINs price will reduce the volume produced, effectively reducing the mandate.”

Reacting to the new analysis, Renewable Fuels Association (RFA) President and CEO Bob Dinneen said, “This study confirms that a demand-destroying 10-cent RIN price cap is absolutely the wrong policy for agriculture and consumers. We agree with Prof. Irwin that such a cap on RIN prices would be disastrous for the RFS and for jobs in the agricultural and manufacturing sectors. As we have stated repeatedly, and as this study underscores, the quickest way to lower RIN prices is to establish RVP parity for E15. That is the only ‘win-win’ solution that upholds the spirit and intent of the RFS and at the same time takes pressure off of RIN prices. We hope the administration closely examines this new analysis as it hosts ongoing discussions on this issue.”

The new analysis is available here.

Read the original release: University of Illinois Analysis: 10-Cent RIN Price Cap Would be ‘Catastrophic’ for Renewable Fuels

Bloomberg

March 1, 2018

By Jennifer A Dlouhy and Mario Parker

President Donald Trump found out how difficult it is to bridge the competing interests of ethanol producers and oil refiners as a third White House biofuel meeting in four days ended with no agreement on how to change U.S. policies.

Trump has been trying to address complaints from refiners who say the U.S. biofuel mandate -- the Renewable Fuel Standard -- is too costly, without alienating another key constituency: corn farmers and ethanol producers who helped elect him president.

Each side was represented in a one-hour discussion on Thursday, but they left with no breakthrough -- only a commitment to keep talking and the parameters of a potential solution, said three people familiar with the talks who asked not to be named to describe the meeting, which was closed to the press.

Participants discussed a possible policy change that would effectively cap the price of the compliance credits refiners use to prove they have fulfilled annual biofuel quotas, in exchange for an environmental waiver to allow year-round sales of E15 gasoline, containing 15 percent ethanol.

Waiver Credits

Compliance credits tracking 2018 ethanol targets plunged 13 percent to 55 cents each after the meeting, according to broker data compiled by Bloomberg. 

Trump floated the idea of the Environmental Protection Agency selling ethanol waiver credits for two years at 10 cents in exchange for the E15 policy change that could expand the domestic market for ethanol.

Senator Chuck Grassley, a Republican from Iowa, the top U.S. corn growing and ethanol-producing state, tweeted after the meeting about what he called an “emerging solution.”

A “true win-win” is selling E15 year-round, a change that would lower refiners’ compliance costs while also helping farmers squeezed by low corn prices, Grassley said on Twitter.

Participants in Thursday’s gathering included the same Republican senators who met with Trump on the issue Tuesday: Ted Cruz of Texas, Pat Toomey of Pennsylvania, and Grassley and Joni Ernst of Iowa.

Economic Impacts Debated

But the focus was on 11 industry representatives who came to spell out the economic consequences of potential biofuel policy changes, including the chief executives of biofuel producers Poet, Green Plains Inc. and Renewable Energy Group Inc. and oil refiners Valero Energy Corp., PBF Energy Inc. and Delta Air Lines Inc.’s Monroe Energy LLC.

Bill Horan, a farmer with Western Iowa Energy LLC, and United Steelworkers President Ryan O’Callaghan also participated.

Tom Nimbley, chief executive of New Jersey-based refiner PBF Energy Inc., termed the conversation “productive.”

“We will continue to work with the president, senators and all stakeholders that can provide important reforms that are a win for farmers and a win for union refinery workers,” Nimbley said in an emailed statement.

But Jeff Broin, chief executive of ethanol producer Poet LLC, who also participated in Thursday’s gathering, said “nothing new was discussed.”

Jobs Imperiled?

“Removing accountability from oil companies would deprive millions of Americans the freedom to choose less expensive, homegrown biofuels and imperil countless jobs and family farms across America’s heartland,” Broin said in an emailed statement. “This issue will continue to play out. We will protect interests of this industry, farmers and consumers.”

Refiners’ concerns generally center around the compliance credits, known as renewable identification numbers, or RINs, that they use to prove they have satisfied annual biofuel quotas.

Administration officials have been considering a menu of possible changes the EPA could make without Congressional action to lower the cost of those RINs and expand the market for ethanol. 

The conflict over the 13-year-old RFS that mandates biofuel use at a certain level began long before Trump moved into the White House, and it’s among the most intractable energy policy disputes in Washington. Federal law enshrines biofuel targets through 2022, but after that the EPA has more latitude to set annual quotas and shift its approach.

“Nothing will change until there is a sense of risk about what might happen after 2022,” said Mike McKenna, a Republican energy strategist. “For most on the Democratic side, this eventually becomes an electric vehicle mandate if they’re in charge. For most on the Republican side, the program should zero out in 2022.”

Trump asked for another meeting on the issue next week and told participants he wanted to see studies on the economic effects of potential policy changes.

Read the original story: Third White House Biofuel Summit This Week Ends Without Deal

Senator Chuck Grassley

March 1, 2018

Press Release

WASHINGTON – U.S. Sen. Chuck Grassley (R-Iowa) today issued the following statement on EPA’s official position, restated as recently as November 2017 that, “high RIN prices do not cause significant harm to refiners.” Grassley also commented on a previously unreleased letter that he, along with Sens. John Thune (R-S.D.), Roy Blunt (R-Mo.), Deb Fischer (R-Neb.) and Joni Ernst (R-Iowa), wrote in January 2018 asking EPA about its previous assessments that RIN prices do not affect the success of refiners. EPA has yet to respond to the senators’ letter, despite numerous staff follow-ups.

“We are told that action needs to be taken to lower RIN prices to help refiners. But under both Democratic and Republican administrations, EPA has found that RIN prices don’t affect whether refiners are successful or not,” Grassley said. “That was true of President Obama’s EPA and it’s true of President Trump’s EPA. Several of my colleagues and I asked EPA about this in light of calls to make changes to the RFS, but we’ve yet to receive a response. I’m always willing to engage in good faith discussions on any issue, but the facts need to be on the table. Changing the RFS based on misinformation and baseless arguments isn’t fair to the thousands of farmers and workers throughout rural America whose livelihoods would be harmed if the RFS were undermined.”

The EPA in November 2017 found (p. 198), “After reviewing the available data, EPA has concluded that refiners are generally able to recover the cost of RINs in the prices they receive for their refined products, and therefore high RIN prices do not cause significant harm to refiners.” In May 2015, EPA found (p. 22), “the obligated parties were generally able to recover this increase in the cost of meeting their RIN obligations in the price they received for their petroleum-based products in 2013.”

The full letter from the senators is available below and can also be found here.

January 11, 2018

The Honorable E. Scott Pruitt, Administrator

U.S. Environmental Protection Agency

William Jefferson Clinton Building
1200 Pennsylvania Avenue, N. W.
Washington, DC 20460

Dear Administrator Pruitt,

As you are aware, we have been asked to participate in discussions with our Senate colleagues regarding the Renewable Fuel Standard.  Specifically, our colleagues are working to construct policy options that would lower RIN prices for certain fuel refiners.  In an effort to fully understand the perceived problem that we are being asked to address, it would be useful to have clarification from the Environmental Protection Agency on a number of topics to better understand the issues being discussed.  We would respectfully request your help in addressing the following questions.

-In November, EPA wrote “After reviewing the available data, EPA has concluded that refiners are generally able to recover the cost of RINs in the prices they receive for their refined products, and therefore high RIN prices do not cause significant harm to refiners.”[1] Has EPA’s view on this subject changed?

-EPA has also stated that “Merchant refiners, who largely purchase separated RINs to meet their RFS obligations, should not therefore be disadvantaged by higher RIN prices, as they are recovering these costs in the sale price of their products.”[2] Does EPA still maintain this view on the effect of RINs on merchant refiners? If not, what has changed?

-A November analysis by Wells Fargo concluded that “…bottom line performance appears positive for most of the Independent Refiners across our coverage universe as the vast majority of the cost of RINs is embedded in the crack spread.” The report also noted that RINs provide a “financial incentive to ‘build out’ wholesale infrastructure.” Does EPA agree with those conclusions?

-The RFS allows obligated parties to fulfill their volume obligations by either blending renewable fuel or purchasing RINs.  Is it accurate that obligated parties have an alternative other than purchasing RIN credits?  Could merchant refiners increase their ability to blend renewable fuels to comply with the RFS?  Is EPA aware of any obstacles preventing any of the merchant refiners from blending physical gallons of biofuels to meet their obligation?

-Many obligated parties have made substantial, long-term investments in renewable fuel blending facilities to meet RFS obligations.  Have the refiners who claim to be severely negatively impacted by RIN prices chosen to make similar investments?  If so, in what way? If not, why not?

-Does EPA have any data that would demonstrate a relationship between RIN prices and quarterly operating income for these certain refiners?

-EPA determined that the RFS and RINs are not causing significant harm to refiners.[3] What are the market factors that primarily affect the financial performance of oil refiners?

-How do refining margins and financial performance differ geographically? What unique factors contribute to regional variations in refining margins in the Northeast, Gulf Coast, Midwest, Rocky Mountain region, and West Coast?

-EPA analysis revealed that “the discounting of renewable fuels enabled by the sale of the RINs, and the higher petroleum prices that result from the cost of purchasing RINs, are expected to offset each other, resulting in the RIN price having no net impact across the entire fuel pool.”[4] In other words, RINs have no impact on retail prices for standard E10 gasoline. Economists from Harvard University, MIT, Iowa State University, and other institutions have come to similar conclusions. Does EPA still maintain the view that RINs have no net impact on E10 gasoline retail prices? If not, what has changed?

-EPA analysis shows that “[h]igh RIN prices are expected to reduce the price of fuel blends that contain a higher percentage of renewable fuels, such as E85...” In turn, EPA found that consumption of E85 increases as RIN prices increase and E85 prices decrease relative to gasoline.[5] Would a price cap on RINs discourage increased renewable fuel consumption?

-Does EPA believe capping RIN prices would reduce or eliminate the economic incentive to expand consumption of fuel blends with higher renewable content, like E15, E85, and B20? Would a price cap on RINs make it more difficult for the marketplace to achieve the statutory renewable blending volumes?

Thank you for your assistance in clarifying these matters.

Sincerely,

Sen. Charles Grassley

Sen. John Thune

Sen. Roy Blunt

Sen. Deb Fischer

Sen. Joni Ernst

Read the original release: EPA Unresponsive to Senators’ Letter on Agency Position on RIN Prices

Senator Chuck Grassley

February 27, 2018

Press Release

WASHINGTON – U.S. Sens. Chuck Grassley and Joni Ernst of Iowa today held a joint press conference call to discuss their meeting with President Trump and others at the White House, as well as the confirmation of Iowa Secretary of Agriculture Bill Northey to serve at USDA as Undersecretary for Farm Production and Conservation. Audio of the press call is available here. Grassley’s statement:

“Today Senator Ernst and I met with President Trump, Senator Cruz, Senator Toomey, EPA Administrator Pruitt, USDA Secretary Perdue and White House staff. I reminded President Trump of his commitment to maintaining 15 billion gallons a year of ethanol under the RFS, and his commitment to biofuels, agriculture and rural America.

“No deal on RFS reform was reached at the White House meeting. And no assurances or commitments were made to change the RFS ahead of the meeting. Senator Ernst and I attended the meeting because we are always willing to meet with our colleagues to engage in good faith discussions on any topic, especially when the President is involved.

“I understand the President is concerned any time an American’s job could be lost. I am too, which is why I strongly support the U.S. biofuels industry, which 50,000 Iowans depend on for their livelihoods. But ethanol isn’t just important to Iowa. It’s important to 14 other states in the Midwest, and to our national security.

“The potential loss of more than 1,000 jobs at PES would be devastating for the families affected. I’m glad we have a President who cares about these blue-collar workers. It’s important though that we are honest with ourselves when examining these issues. If we don’t look at the facts before reaching conclusions, it becomes harder to fix problems. Every independent study indicates that other factors, not RIN prices, led to the bankruptcy of PES. Notably, merchant refiners in Texas and elsewhere are recording record profits.

“Senator Ernst and I suggested specific policy changes that would be a win-win for biofuels and oil. But we’ve made it clear all along that a cap or waiver credit for RINs would not be a win-win. It would undercut demand for ethanol and undermine the integrity of the RFS. Farm jobs and blue-collar energy production jobs would be lost as a result. I appreciate that President Trump wants to look out for domestic energy production workers. That does not need to be at the expense of ethanol production. The RFS shouldn’t be gutted for interests seeking market advantage in disguise.

“I’m glad that the unrelated hold on Bill Northey was lifted, and he has been confirmed by voice vote. Bill Northey’s nomination to USDA has never had anything to do with a program administered by EPA. Secretary Northey is a highly qualified and honorable man. He and his family waited long enough. I’m looking forward to Secretary Northey’s swearing-in so he can get to work for American agriculture and farmers.”

Read the original release: Grassley Statement on Northey Confirmation, RFS White House Meeting

Biofuels International

February 20, 2018

Renewable Fuels Association

February 16, 2018

By Emily Druckman

A new analysis from the University of Illinois shows that the conditions that caused high conventional biofuel (D6) RIN prices are changing rapidly and that “…it is not out of the realm of possibility for D6 RINs prices to fall back their pre-2013 level of just a few cents without making any changes to the RFS.”

The authors argue that high D6 RIN prices have been driven by the “gap” that exists between domestic ethanol consumption (estimated at 14.5 billion gallons in 2017) and the 15-billion-gallon statutory requirement for conventional renewable fuels. The size of that “gap” continues to shrink rapidly as E10, E15, and E85 blending has expanded. Thus, as that expansion continues at a rapid pace, the “gap” will be fully closed and RIN prices will fall dramatically. As the Renewable Fuels Association has pointed out, this is exactly how the RFS was intended to work. Establishing RVP parity for E15 would certainly help accelerate the closing of that gap. Specific findings from the University of Illinois report include:

“What seems to have gotten lost in all the noise surrounding the political war over the RFS is how rapidly the conditions are changing that created the high ethanol RINs prices in the first place. The key is the “gap” between the ethanol blend wall and the conventional ethanol mandate.”

“With the statutory conventional ethanol mandate fixed at 15 billion gallons, the growth in ethanol use has led to a sharp decline in the magnitude of the conventional gap. In particular, the latest ethanol use estimate from the EIA for 2019 implies a conventional gap of a little less than 300 million gallons. This gap is so small that an increase in projected ethanol use for 2019 of just two percent would erase the gap completely.”

The bottom-line from this analysis is that the conventional ethanol gap is well on its way to being eliminated in the next few years, even without a large expansion in the use of higher ethanol blends such as E15 and E85. If this does occur, the impact on D6 ethanol RINs prices could be almost as profound as what we witnessed in 2013, but in exactly the opposite direction.

“It is not out of the realm of possibility for the price of D6 RINs to go back to their pre-2013 level of just a few cents. Of course, this assumes that the conditions that have been driving ethanol consumption upward do not change. Even if conditions do change, the size of the conventional gap is much more manageable than just a few years ago and opens the door for very modest increases in E15 and/or E85 to close the conventional gap. For example, a 300 million gallon conventional gap could be eliminated with an increase in E15 consumption of just 2 billion gallons, or about 1.3 percent of total gasoline consumption.”

“This means it is not out of the realm of possibility for D6 RINs prices to fall back their pre-2013 level of just a few cents without making any changes to the RFS.”

“The first supposed ‘blend wall’ was the 10% ethanol blend level. Well, we crashed through that last year and are now blending above 10.0% nationally,” said Renewable Fuels Association President and CEO Bob Dinneen. “But the next blend wall is the 15-billion-gallon allotment for conventional ethanol.  With increased E15 and E85 blending, we are careening toward smashing that wall as well. It seems, however, that the closer we come to that wall, the more intent some refiners become in hitting the brakes, insisting upon RFS demand destruction as the only safe course. This analysis lays waste to that false premise, and demonstrates, as we have insisted for years, that increased ethanol use will also break the 15-billion-gallon wall and lead to lower RIN prices. And RVP parity for E15 would lower RIN prices even more quickly while leaving the RFS intact. Now that’s a win-win,” he added.

Read the original analysis: Analysis: RIN Prices of ‘Just a Few Cents’ are Coming—Without Changes to RFS

Ethanol Producer Magazine

February 15, 2018

by Renewable Fuels Association

The Renewable Fuels Association today hailed the release of two studies by the Department of Energy that find ethanol-based high octane fuels can deliver substantial fuel economy improvements and emissions reductions when paired with optimized internal combustion engines.

The studies are part of the DOE’s Co-Optimization of Engines & Fuels initiative (Co-Optima), which is focused on identifying coordinated fuel and engine technology pathways that can improve passenger vehicle performance and reduce greenhouse gas emissions.

DOE started by analyzing the properties of dozens of potential liquid fuel components to determine which blendstocks offer the greatest potential to provide efficieny and emissions benefits in internal combustion engines. In the end, the study narrowed the pallet of fuel options down to the eight most promising high-octane blendstocks that could be blended into gasoline for better performance. These blendstocks, co-optimized with advanced gasoline engines, show potential to improve passenger vehicle fuel economy by 10 percent.

The study found that alcohol fuels, including ethanol, offer many desirable properties that will help achieve the goals of greater fuel economy and lower emissions. “Alcohols generally impart high Research Octane Number (RON), octane sensitivity, and heat of vaporization when blended into representative gasoline blendstocks,” the study found.

DOE scored the various fuel components using “merit function” criteria that focuses on the fuel’s: ability to improve engine efficiency; ability to meet current critical fuel-quality requirements; and whether there were any “showstopper” barriers to introducing these blendstocks commercially by scale by 2025-2030. Ethanol was among the blendstocks having the highest merit function values, according to DOE.

“As this new DOE research shows, ethanol is a phenomenal source of octane for high-octane fuel blends. Ethanol’s unique attributes—including high octane sensitivity and heat of vaporization—make it a highly attractive component for the high-octane fuel blends of the future,” said RFA President and CEO Bob Dinneen. “We strongly encourage the Environmental Protection Agency to take note of this research as it completes the Final Determination of the Midterm Review for the 2022-2025 fuel economy and GHG standards. Pairing advanced internal combustion engine technologies with high-octane, low-carbon fuels like E25 or E30 would be the lowest cost means of complying with increasingly stringent GHG and fuel economy requirements through 2025 and beyond.”

Read the original article: Ethanol to Aid Engine Efficiency Improvements, Emission Reduction

CarsGuide

February 13, 2018

by Tim Nicholson & Justin Hilliard

Nissan has confirmed it is looking at range-extender hybrid, hydrogen fuel-cell and biofuel powertrain options for its future line-up of light-commercial vehicles, including the Titan large pick-up.

When questioned about possible future LCV powertrains at the Nissan Futures event in Singapore last week, Renault-Nissan-Mitsubishi Alliance global director and Nissan Research Centre general manager Kazuhiro Doi suggested three substitutes for internal combustion engines.

“I think one of the possible solutions is e-Power-type of electrification,” he said. “We can improve the efficiency of the gasoline engine or diesel engine more by supporting the electrified technologies.”

'e-Power' is Nissan's version of a hybrid system that employs an electric motor to drive the wheels while a small-capacity petrol engine and regenerative braking charge its battery pack – similar to the Holden Volt.

This technology is currently available with the Serena people-mover and Note light hatch that are offered overseas, but Nissan has announced it will introduce more 'e-Power models' soon.

“The other is maybe fuel-cell type of technologies,” Mr Doi added. “It is okay to use biofuel or it is okay also to use hydrogen. Because in the case of hydrogen, the issue is the distribution. But if that is fleet use, we can have … a hydrogen station for fleet business use.

“Another issue is the hydrogen tank. In case of the hydrogen tank, we just increase the capacity. And even though we increase the capacity of the hydrogen tank, the weight itself has not changed, it is just carrying the hydrogen. But in the case of the battery, if we double the battery, the weight is going to be doubled. That is the critical difference.”

He also proposed the use of biofuel as a different green option for LCVs, adding that the cost of hydrogen technology is still too high to implement now.

“In the case of biofuel, the availability of energy is much, much easier than hydrogen. Maybe in that sense, it may be more practical. And I believe, technology-wise, both of them  (biofuel and hydrogen fuel-cell) are possible.

“The question is how we can commercialise it. To commercialise it, we still need to have a breakthrough about the cost. Not only the technology but also the distribution.”

Specifically, biofuels are developed from liquids that have been extracted from other materials like plant and animal waste.

Nissan lobbed the e-Bio Fuel-Cell Prototype in 2016, which employed a special fuel-cell that was created with solid oxide electrolytes instead of noble metals, allowing the conversion of gaseous hydrogen into electricity to top up a 24kWh battery that motivated an electric motor.

Currently, there are several Nissan LCVs sold globally, including the mid-size Navara and large Titan pick-ups, the NV200/300/400 and fully electric e-NV200 vans, and the NT400 light truck.

Mr Doi said he did not think heavy-duty trucks should be powered by pure-electric powertrains due to their significant weight.

“Electric vehicles cannot cover everything. Usually a heavy-duty truck puts lots of load and the vehicle itself is heavy. I think it is not a good idea to put tonnes of battery on the heavy truck.

“Is that good idea to put more and more heavy stuff on the vehicle? It’s something strange. Also heavy trucks run long mileage. It is better to have some other alternative solutions.”

Nevertheless, Tesla revealed its electrified Semi truck in November last year, providing a claimed driving range of 483 to 805km on a single charge thanks to its four electric motors.

Nissan Motor Asia Pacific regional vice-president of marketing and sales for Asia and Oceania, Vincent Wijnen, confirmed that the company was considering an expansion of its electrified LCV models.

“We are selling a lot of LCVs globally, but it’s very different per region,” he said. “In this region, including Australia, I don’t think it has been necessarily the focus, with the exception of utes or pick-ups. But if you discount that and look at vans or small trucks, compared to other regions we have not really been focusing on it.”

Mr Wijnen added that looking at other offerings and technologies from Nissan’s alliance partners was another possibility.

“That doesn’t mean we shouldn’t. Because we have the products in our line-up,” he said.

“We are part of an alliance now, so accessibility to assets or complete products or sharing components is much easier when you are that size.

“So I think it is one of the things we need to, we are looking at going forward to make sure. Because it is an opportunity that we are not today necessarily exploiting fully.”

Nissan Australia managing director and CEO Stephen Lester said he was willing to assess electrified LCVs locally – like the aforementioned e-NV200 – but committing to these products would have to be justified economically.

“As I have told the product team numerous times, there is not a product that we should not be considering at least looking at,” he said. “It all comes back to commercial viability, the ability to meet the regulations of the local government for homologation and to bring a product in that meets the safety and performance expectations, and the fit for purpose expectations of Australian consumers.”

Mr Lester added that he had no update on the Titan large pick-up's Australian business case, but said he thought such a model could be a success.

“There is no secret that I think that there is opportunity in Australia for the car. This is one of the largest ute markets in the world. But there are no major players there from a significant volume perspective, and right now anyway I know there has been speculation, but the reality is I think Titan could be a vehicle that, if we can get it here to Australia, then it will work.”

Read the original article: Nissan Considering Hybrid, Fuel-cell and Biofuel Utes and Vans