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US: Republicans struggle over ethanol mandate

Greg Abbott, Governor of Texas, By World Travel & Tourism Council (Greg Abbott, Governor of Texas) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
Greg Abbott, Governor of Texas, By World Travel & Tourism Council (Greg Abbott, Governor of Texas) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Republican senators from the corn-producing Mid-West and Oil-producing South are split over the value of the mandate. Ultimately, it comes to who pays and who is paid.

On 1 December, Texas Governor Greg Abbott wrote to the Environmental Protection Agency (EPA) chief Scott Pruitt asking for a year-long waiver of the Renewable Fuel Standard, which sets the ethanol mandate. The Governor cited costs to refineries as the cause of the ‘severe economic harm’ that warrants the waiver.

The Governor’s request came into conflict with the interests of ‘Big Corn’ in agriculture centres like Iowa, where farmers have come to rely on the mandate for revenue.

The main complaint is over ‘renewable identification numbers’, the credits that refineries are required to purchase if they don’t blend the gasoline with ethanol themselves to prove that they are complying with regulation. These credits are traded on an opaque market and their prices have increased in recent years.

In his letter to the EPA, Abbott said that the RIN’s “are not taxes, but massive wealth transfers from the petroleum refining sector to blenders and traders.”

In what the New York Times called ‘a rare setback for big oil’, the EPA rejected the waiver, meaning the point of obligation remains with the oil refiners..

The National Fuels Association cited studies by Wells Fargo, MIT, Harvard University and others who say that refineries recoup their RIN expenses in the price of their product.

This hasn’t stopped Southern politicians, notably Ted Cruz, from appealing to the president to free oil producers from the obligation. Reuters reported 7 December that, after a meeting with Trump about the issue, Senators said that the President was open to reforming the mandate.

With mid-term elections approaching in 2018, the fight over this is only going to intensify, with Senators and Representatives scrambling to show their worth to the electorate. Difficult, considering the record unproductivity of Congress and controversial recent legislation like Trump Care and

Earlier this year, the EPA issued a short-term waiver covering areas of Texas effected by Hurricane Harvey, citing an “extreme and unusual fuel [] supply circumstance”. The previous Governor, Rick Perry, asked for a waiver in 2008 when corn prices sky-rocketed.

Greg Abbott, Governor of Texas, By World Travel & Tourism Council (Greg Abbott, Governor of Texas) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons