Wyoming Sens. John Barrasso and Cynthia Lummis this week joined 15 other senators calling for changes to the Renewable Fuel Standard.
In a letter to Environmental Protection Agency (EPA) Administrator Michael Regan, lawmakers asked the agency to eliminate or reduce renewable fuel volume requirements for 2021 in order to protect small refineries and reduce gasoline prices.
Under the Renewable Fuel Standard, petroleum-based transportation fuels sold in the U.S. are required to contain a minimum volume of biofuels — primarily ethanol. That minimum is set each year by the EPA.
Barrasso has long argued that small refineries, including four in Wyoming, are impacted disproportionately by the Renewable Fuel Standard and should be exempted from its mandates.
“Obligated parties subject to the onerous requirements of the RFS have been facing historically high compliance costs, which threaten the viability of these entities’ continued operations,” the senators’ letter reads.
Unlike large oil companies, small refineries are usually equipped only to refine crude oil, and are unable to blend in biofuels themselves. The blending happens later on — but the refineries still have to prove it.
“They’re responsible for showing all this biofuel was blended in the fuel supply, but they don’t control the blending,” said Brendan Williams, vice president of government relations for PBF Energy. “And so as a result, they actually have to buy credits that become available, when the biofuel is blended, on the market.”
The problem, Williams said, is that former President Donald Trump’s EPA set the minimum volume of biofuel too high last year, driving up the cost of credits. Then the COVID-19 pandemic diminished fuel demand and took some ethanol production offline.
“When you couple those two factors together, you have an unnaturally large standard, massive demand decreases, some problems with ethanol production — you’ve kind of created this perfect storm for credit [prices] to rise exponentially,” Williams said.
The Trump administration didn’t set a standard for 2021. Neither has the Biden administration, though Reuters reported last Friday that the EPA plans to lower biofuel blending requirements in 2021 compared with 2020.
So far this year, the market has assumed this year’s standard will be the same as last year, keeping credit prices high, Williams said. Part of those costs are borne by refineries, but the rest are paid by consumers at the pump, contributing to steep gasoline prices.
In their letter, the legislators expressed concern not only about gas prices staying prohibitively high, but about credits running out entirely.