The Renewable Fuel Standard (RFS) program was created under the Energy Policy Act of 2005 (EPAct), which amended the Clean Air Act (CAA). The Energy Independence and Security Act of 2007 (EISA) further amended the CAA by expanding the RFS program. EPA implements the program in consultation with U.S. Department of Agriculture and the Department of Energy.Here's a handy chart that shows what Congress thinks is a good idea for the total volume of "renewable fuels" in our future:
The RFS program is a national policy that requires a certain volume of renewable fuel to replace or reduce the quantity of petroleum-based transportation fuel, heating oil or jet fuel. The four renewable fuel categories under the RFS are:
- Biomass-based diesel
- Cellulosic biofuel
- Advanced biofuel
- Total renewable fuel
The 2007 enactment of EISA significantly increased the size of the program and included key changes, including:
- Boosting the long-term goals to 36 billion gallons of renewable fuel
- Extending yearly volume requirements out to 2022
- Adding explicit definitions for renewable fuels to qualify (e.g., renewable biomass, GHG emissions)
- Creating grandfathering allowances for volumes from certain existing facilities
- Including specific types of waiver authorities
The Clean Air Act provides EPA authority to adjust cellulosic, advanced and total volumes set by Congress as part of the annual rule process.
The statute also contains a general waiver authority that allows the Administrator to waive the RFS volumes, in whole or in part, based on a determination that implementation of the program is causing severe economic or environmental harm, or based on inadequate domestic supply.
What may you take from that report?
- Transportation fuel costs will increase'
- Minimal effect on greenhouse gas emissions (GHG) (absent some "technology development")
- While the goals of the Energy Security and Independence Act is to reduce "dependence on foreign oil and reducing GHG emissions" no part of the Act refers to the impact of technology such as fracking that could allow the U. S. to cease needing "foreign oil"
- The EPA issues, for qualifying fuels (defined in slide 6), a "renewable identification number (RIN) attached to each gallon. These RINs are required to be submitted by fuel suppliers "on the basis of their use of petroleum-based fuels"
- "RINs can be traded and banked"
- The guesstimates made by the planners in putting together this program did not anticipate that technology might make vehicles more fuel efficient thus creating issues. See slides 9 and 11.
- EPA decision makers can affect the price of food and transportation fuesl. (slide17) Note that on slide 19 that "Ethanol accounts for 40% of the corn produced in the U.S.
- Slide 23: "for each 100 gallons of gasoline or diesel they sell, suppliers are required to submit - 1.6 biomass-based diesel RINs - - 3.4 additional advanced biofuels RINs - - 8.3 additional renewable fuel RINs (met with corn ethanol)
- CBO's renewable RIN price estimate for 2017 was $1.55 to $2.10
Yeah, exciting stuff. But here's what happens in the real world, the trading of RINS is putting American refineries and refinery workers at risk - which has a potentially serious effect on national security - because without refineries and their workers, where will we get fuel for our aircraft, ships and military vehicles? Senator Cruz of Texas (of course) has taken up this issue as reported by the Oil & Gas Journal in
Time has come to overhaul RINs, Cruz tells Philadelphia refinery workers
US Sen. Ted Cruz (R-Tex.) called for a cap on the price of renewable identification numbers (RIN) to halt speculation and preserve jobs at refineries. "We're here because the jobs, and the men and women whose livelihoods and families depend on those jobs, are at risk from a broken government regulation system that isn't working, and that we have to fix," he said a Feb. 21 rally at Philadelphia Energy Solutions (PES).It's been a problem for a while. Here's a NYTimes report from 2016, High-Price Ethanol Credits Add to Refiners’ Woes:
PES cited dramatically higher prices for the renewable fuel credits the Environmental Protection Agency administers when the refiner declared bankruptcy nearly a month earlier (OGJ Online, Jan. 23, 2018). "In the year 2012, this refinery-the largest refinery on the East Coast-paid about $10 million for RINs. Then the RINs market broke. The price skyrocketed from 1-2¢ each to as high as $1.40 each," Cruz said.
"This means that last year, in 2017, this refinery spent $218 million buying RINs. That is more than double the payroll of the men and women sitting here," Cruz said. "Now, how many think the refinery should be wasting money on government licenses that don't pay a damned thing rather than paying your salaries? It doesn't make any sense. It is nuts."
"Here's the crazy thing: Of the $218 million [PES] paid for RINs, do you know how much ended up in the pockets of Iowa corn farmers? None. The money doesn't go to the corn farmers, and it doesn't go to the ethanol producers. Instead, billions [of dollars] are being made by Wall Street speculators and giant integrated companies that are earning a windfall on this broken regulatory system," Cruz said.
Stiff competition, heavy regulation and high operating costs make for some of the lowest profit margins in the petroleum industry. And in the last year, profits have been even harder to come by because of the global fuel glut that has translated into bargain-basement prices for the gasoline and diesel that refiners produce.Finally, it is worth noting who ultimately pays the price for cost increases to refiners - it's the American public, to whom the costs are passed on with higher gas and diesel prices at the pump.
But lately, the game has been tougher still for people like Jack Lipinski, chief executive of CVR Energy, an independent operator of two refineries in Oklahoma and Kansas. The problem involves a soaring cost that is outside of his control.
This year, on top of everything else, CVR Energy will have to spend as much as $235 million on credits for renewable fuels. That is nearly double what the company spent last year on the credits, and it exceeds the company’s total labor, maintenance and energy costs.
Mr. Lipinski blames the federal program that requires CVR to buy the credits, but he also suspects a role by unknown market speculators who may be driving up the costs of the credits.
By the way current retail gas price hikes are related to the refineries performing maintenance and shift over to producing different blends of gas for the warmer season to come.