ETHANOL MANDATE UPDATE: Oil Barons Are Making Billions And Blue Collar Workers Are Hurting

Trump and steelworkers Getty Images/Chip Somodevilla

Michael J. Pappas Former member of Congress
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It isn’t often that the president of the United States can avert a crisis with a stroke of a pen, but when it comes to saving blue-collar jobs, it could be that easy for Donald Trump.

In late April, steelworkers and small refinery workers traveled to Washington, rallying to save their jobs from a well-intentioned but nonfunctioning federal dictate.

That dictate is the ethanol mandate within the Renewable Fuel Standard, and it is causing small and medium-sized refineries to creep toward insolvency in droves.

Hoping it would lessen greenhouse gas emissions, Congress in 2007 required that refiners blend a specified percentage of ethanol into their gasoline each year. Now, however, Democrats concede this ethanol requirement harms, not helps, the environment — all while causing a multitude of other negative externalities for middle-income families.

Rep. Peter Welch, a Vermont Democrat and one of the ethanol bill’s original cosponsors, recently stated that while the law’s creators “had the best of intentions…it has turned out to be a well-intended flop.” Welch went on to express disappointment with how his flawed legislation has unintentionally expanded greenhouse gas emissions, inflated food prices, and negatively affected small vehicle engines.

Instead of improving environmental conditions, the ethanol mandate has induced more government wealth transfers from small businesses to large, billion-dollar corporations.

Each gallon of renewable fuel receives a Renewable Identification Number (RINs), and the government counts each refiners’ RINs credits to measure compliance with the ethanol mandate. Refineries that are unable to blend such high quantities of ethanol have the option of purchasing these tradable RINs credits from others that produce more gallons of ethanol-blended fuel than required of them by Washington.

But here’s the catch: most independent merchant refiners are incapable of blending fuel and are thus beholden to the world’s largest oil companies, which sell them their excess RINs. As a result, the government has in effect created an hugely profitable marketplace for companies such as BP PLC, Royal Dutch Shell PLC, and Chevron Corp., which could receive $1 billion in revenue annually just from selling RINs.

While investors happily engorge in this speculative marketplace, small businesses across the country continue to struggle as a result. Purchasing these RINs credits — whether directly from one of these big oil companies or indirectly through a hedge fund or Wall Street bank – is not cheap. In fact, it is the main reason why the Northeast’s largest refiner recently filed for bankruptcy.

The $832 million Philadelphia Energy Solutions spends to comply with the RINs program cost more than retaining the company’s 692 unionized steelworkers on payroll. With other refineries paying $500,000 a day to comply with the regulation, the Center for Workforce Information & Analysis estimated in 2012 that more than 18 jobs disappear for each refinery layoff.

The Wall Street Journal is right: This program has become nothing more than an inadvertent, “multi-billion-dollar windfall for some of the world’s biggest oil companies.” That’s why such companies formed a coalition, the Main Street Energy Alliance, which advocates for retaining the nonfunctioning ethanol mandate as-is.

Recognizing that thousands of jobs are on the line, EPA Administrator Scott Pruitt has granted 30 “hardship” waivers exempting small refiners from the RFS requirement. Appealing for government waivers to save blue-collar workers jobs might provide short-term relief but is not a long-term solution to the problem at hand.

Sen. Ted Cruz (R-Texas) is among those who are proposing a solution. He is requesting the EPA impose a cap on the cost of the RINs credits that smaller refiners must purchase to comply with the government’s mandate. At last week’s rally, he correctly noted that the law Congress passed in 2007 gives the executive branch flexibility to reform the RINs program.

President Trump should have every incentive to do so. After all, many thought his unlikely victory in 2016 came from his ability to appeal to the same blue-collar workers whose livelihoods are threatened by the RINs mandate.  They are the “forgotten men and women” that President Trump promised to remember.

Reforming the RINs mandate will not only save jobs and families that are standing on the precipice of the unemployment line; it would also strike a blow against the special interests that are profiting on their backs — the same bad actors that the president says he wants out of Washington.

The time has come to save these jobs, help these families, and reform a broken system.

Michael J. Pappas is a former Republican congressman for New Jersey’s 12th congressional district.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.