The American Petroleum Institute and two Republican US senators separately asked the Environmental Protection Agency to address renewable identification number (RIN) costs, which have jumped by 1,400% since the beginning of 2012.
API’s request came as it released a NERA Economic Consulting Study that concluded that the federal Renewable Fuel Standard, under which refiners are required to buy RINs to help them meet cellulosic ethanol requirements, is irretrievably broken and poised to seriously harm consumers, the US economy, and the nation’s fuel supply system.
“The study found that by 2015, the economic consequences of continued implementation of the RFS would be severe,” API Downstream Group Director Bob Greco told reporters during a Mar. 20 teleconference.
He said these could include an almost $800 billion decrease in US gross domestic product, a $580 billion decrease in take-home pay for American workers, a 300% increase in the cost of manufacturing diesel fuel, a 30% rise in the cost of gasoline (which could result in rationing and other transportation disruptions), and the unintended consequence of encouraging refined product exports to comply with the law.
API will continue to press Congress to fully repeal the RFS, Greco said. Immediately, it will urge EPA to reduce the total renewable fuels volume requirement and waive the cellulosic ethanol requirement for 2013, he indicated.
Prices already high
Meanwhile, US Sens. David Vitter (R-La.) and Lisa Murkowski (R-Alas.)—in a Mar. 20 letter to Gina McCarthy, acting administrator for air and radiation at EPA—noted that already high US gasoline prices are ready to climb further as RINs that cost 5¢ each at the end of 2012 now cost as much as $1.10 each.
“Reports cited several reasons for the rapid price increase, including declining gasoline demand, the ethanol ‘blend wall,’ unrealistic RFS mandates, and recent instances of fraud in the RIN market which increased uncertainty among obligated parties,” said Vitter, the ranking minority member of the Environment and Public Works Committee, and Murkowski, who holds the same position on the Energy and Natural Resources Committee.
“These reports also make clear that, as RIN prices continue to climb, refiners will be forced to pass along the increased costs to consumers, export more product overseas, or lower refinery utilization rates,” they told McCarthy.
EPA will need to act decisively to avoid these and other negative consequences, Vitter and Murkowski maintained. “Accordingly, we ask that you utilize any and all existing regulatory authority and flexibility to address the issue of rising RIN costs and alleviate the threat of increased consumer fuel costs,” their letter said.
“Rising RIN costs have increased refiner costs,” said Greco. “For every dollar spent per gallon of ethanol on the RINs market, the cost of making E10 gasoline rises 10¢. The rising costs of RINs are putting enormous pressure on refineries, and—consequently—could put upward pressure on fuel prices.”
Growing problems
NERA’s study also found that as RFS compliance volume requirements increase, so does the challenge of meeting them, he continued. “NERA predicts that eventually many refiners won’t be able to get the RIN credits they need because the credits are finite,” Greco said.
“At that point, according to NERA, they have no effective options and will be forced to reduce their biofuel obligation either by decreasing fuel production—with diesel fuel impacted first—or by exporting fuel, since exported gasoline and diesel aren’t subject to the RFS,” he indicated.
Greco said Congress is increasingly hearing about problems with the RFS not just from the oil industry, but agriculture and food groups. “We may see some bills introduced,” he said. “Congress needs to have this debate as soon as possible.”
“The mandate is continuing to increase,” Greco warned. “Very soon—if not this year, then next year—we’ll pass the blend wall and no longer be able to blend ethanol up to 10%.”
Contact Nick Snow at [email protected].