Renewable Fuel Standard Reform Benefits Taxpayers

REUTERS/Ahmed Jadallah/File Photo

Ross Marchand Policy Analyst, Taxpayers Protection Alliance

When most Americans think of taxes, a check made payable to the Internal Revenue Service comes to mind. But regulatory agencies can also levy various types of taxes, redistributing resources from millions of consumers to the connected few.

Fortunately, the Environmental Protection Agency (EPA) is working to provide relief to taxpayers and gas buyers across the country by reforming the decade-old Renewable Fuel Standard (RFS). This program, originally designed to bolster America’s energy dependence, has enriched a handful of oil firms at the expense of most Americans.

Under the RFS, the EPA mandates that refineries blend a set amount of ethanol into their gasoline annually. Each batch receives a digital serial number, called a Renewable Identification Number (RIN), which the government bean counts to ensure each company mixes as much as it specified. Refineries can sell credits to other companies that fall short of meeting their share of the Washington-mandated quota.

For taxpayers, there are several problems with this ethanol mixing requirement. The first of which is what’s most visible: the U.S. Department of Agriculture made available $100 million in taxpayer funds supporting the installation of ethanol fuel blender pumps.

Of course, this is not the end of the story; hidden taxes abound.

The U.S. Department of Energy has shown that biofuel mixtures containing 10-percent ethanol reduce vehicles’ fuel mileage by 3-to-4 percent due to ethanol containing less energy than gasoline. Perhaps the biggest burden on taxpayers comes from the costs that refineries are forced to either shuffle directly onto consumers’ lap or pull from cost-saving research & development funding.

Blending ethanol into gasoline is tedious and time-intensive. Many refineries refrain from the practice since the rapid degradation of ethanol mixtures poses a problem for the refineries that don’t sell gasoline directly to consumers. That’s why, typically, only the largest oil firms take part: because they can easily blend the short-lived ethanol mix at their onsite facilities right before it goes into consumers’ gasoline pumps.

This means that nearly every other refinery in the country is beholden to the largest players for RIN credits. The behemoths are well aware of this, which is why they have created a speculative marketplace for these ethanol credits, skyrocketing the price from less than ten cents to a high of close to $1.50.

For some refiners, this reality has made RINs their second-largest expenditure item after crude oil. The New York Times cautions that this system could lead “to higher prices for drivers at gasoline and diesel pumps.”

While more undoubtedly needs to be done to protect taxpayers, in the short term, President Trump’s EPA has granted hardship exemptions to small, independent refineries, as allowed under the law, to prevent them from going bankrupt while imposing downward pressure on the price of gasoline.

Yet, lawmakers driven by special interests are keen on reversing these reforms and preserving the status-quo for the enriched few.

In a letter to House Subcommittee on the Environment chairmen John Shimkus (R-Ill.) and Paul Tonko (D-N.Y.), Bob Dinneen of the Renewable Fuels Association laughably claimed that “the value of RIN credits” — artificial credits created by government force — “is primarily determined by market fundamentals.” He then went on to claim that small refinery exemptions must end because they have sharply reduced the price of RINs, and thus ethanol.

Dinneen’s interpretation of the facts is interesting. While he had no problem citing statements from the interests that benefit from the status quo and allege that refineries recoup their RINs costs, he left out ones from the small, independent refineries that are struggling.

Even a cursory look at the data makes clear that the price of RINs has little to do with ethanol demand. High RINs prices do not help farmers; they help oil and speculative interests while jeopardizing the well-being of taxpayers and the security of industrial jobs.

The notion that the Renewable Fuel Standard needs serious reform is not a controversial one; it is accepted by members of both parties and by journalists across the ideological sphere.

Instead of reversing course to please these individuals profiting handsomely from government red tape, the Trump administration should further its efforts to provide relief to its base in Middle America and across the country.

Ross Marchand is the director of policy at the Taxpayers Protection Alliance. 


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