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Big Agra & Big Oil Are at War Over Renewable Fuel and White House May Just Step Aside

biofuel, corn vs oil, renewable fuel program

The Renewable Fuel Program, a program in place since George W. Bush, is causing tension between the corn and oil industries. The White House just announced they may step aside and let Congress handle the debate.

After a month of meetings discussing the future of biofuels, the Trump administration may recede from negotiations between the American corn and oil industries, leaving the conclusive reformations to be completed by lawmakers in Congress.

U.S. Agriculture Secretary Sonny Perdue signaled this possibility in a speech at the National Press Club in Washington on Tuesday.

“The White House is trying to determine whether they need to make a call on a decision, or allow Congress to do it,” Perdue said, according to a transcript provided to Reuters.

The debate between these industries revolves around the costs of fuel blending as it is required by the Renewable Fuel Program (RFP), a regulation which has been in place since the George W. Bush presidency. The RFP requires oil refiners to blend increasing volumes of biofuels, some corn-based, into the nation’s fuel.

Refiners purchase these biofuels through credits known as Renewable Identification Numbers (RINs), which account for the price of fuel mixing. These credits have surged in price over recent years, putting pressure on merchant refineries and, in some cases, causing merchants to fold.

Philadelphia Energy Solutions LLC, a major refinery in Pennsylvania employing approximately 1,000 Philadelphian workers, blamed the RFP for its bankruptcy in January. It is now looking for a bail-out from hundreds of billions in RIN debt owed to the EPA, who administers the credit program.

In the following months, the Trump administration participated in debate and negotiations between Big Oil and Big Corn, searching for an amendment of the RFP that would support both sides.

Ethanol plant in South Bend, Indiana.

One early solution encouraged by the refineries was a cap on RINs, a move that corn-state senators claim would destroy their farmers’ livelihood.

A compromising proposal moved to allow the sale of high-ethanol gasoline year-round. Currently, fuel with a 15 percent ethanol content is restricted under the Environmental Protection Agency during summer months, with the intention of limiting ethanol emissions and air pollution during months in which the greatest number of American vehicles hit the roads. Retailers of E15 fuel cannot sell the substance to vehicles from June 1 to Sept. 15.

https://commons.m.wikimedia.org/wiki/File:Brighton,_MI_Sunoco_Ethanol-Free.JPG

A gas station in Brighton, MI advertises ethanol free fuel.

As the negotiations have persisted, the market value of RIN credits has dropped a significant 60 percent since price spikes in November 2017. With Perdue’s indication that Trump has not struck a deal between the two industries, the volatile credit prices crawled back up to 50 cents per credit.

Although a cap has not been set on RIN prices, the drop has benefitted the fuel industry, who’s been begging for a break.

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