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'Art of the Deal' Meets Renewable Fuel Standard

It’s the ultimate dealmaker versus the ultimate dealmaking challenge. President Trump has again sought changes to the Renewable Fuel Standard (RFS) that he hopes both supporters and critics of this program can live with. The previous reform effort granted ethanol producers and corn growers their request to raise the amount of ethanol allowed year-round in gasoline from 10 to 15 percent (E-15), while, on the other hand, giving the refining sector more exemptions for small facilities which serves to lower the overall RFS targets.   
 
But this did not create peace. Pro-RFS forces soon demanded both E-15 and fewer small refinery waivers. Now, the administration has announced that, while it will still grant small refinery exemptions, it will reallocate the waived amounts to non-exempt refineries and thus preserve the 15 billion gallon maximum set out in the law. It will also ease the labelling requirements for gas stations selling E-15.  
 
Many refiners, for their part, were less than satisfied with the small refinery exemptions and wanted a more comprehensive overhaul of the program, if not outright repeal. Thus, they are particularly displeased with the reallocation idea which, in their view, weakens the administration’s already-inadequate reform effort. They have also challenged the legality of the E-15 provisions in federal court.  
 
On the other side, there’s no guarantee the ethanol producers and corn growers won’t once again make additional demands. In other words, one and possibly both sides are still unhappy.
 
Lost in the debate between the biofuels industry and the petroleum industry is what the RFS means for consumers. Gasoline prices are relatively low right now, but not because of the RFS. And we are always one bad corn crop away from an ethanol-induced price spike. Further, the news on the availability and affordability of biodiesel and cellulosic biofuels, which make up the rest of the RFS, is even more discouraging.   
 
The proposed changes can only add to the upward pressure on pump prices. And the proposed E-15 labelling provisions could lead to increased misfueling because E-15 is not suitable for small engine equipment like boats and motorcycles and lawn equipment, nor for millions of older vehicles.  
 
Most serious of all is that few are looking ahead to post-2022, when the 2007 statute gives the Environmental Protection Agency a great deal more discretion in setting volume requirements. It is unknown what direction a future EPA may take with the RFS, but if Californias Low Carbon Fuel Standard and Cap and Trade Program are any guide, it won’t be good news for consumers. Either a second-term Trump or a Democratic president will decide.