Does the Trump administration care more about playing politics with the ethanol lobby, or keeping its word about making the U.S. an “energy-dominant” nation? The American people will soon find out.
The Trump administration recently held meetings with four senators — two that support change and two that support the status quo — to discuss the possibility of fixing one of the most significant handicaps to the president’s energy policy agenda: the Renewable Identification Numbers, or RINs, mandate, found on one of the many pages within the Renewable Fuel Standard’s, or RFS, regulatory book.
The misnamed Energy Independence and Security Act of 2007 extended the size and scope of the RFS. It requires that most U.S. fuel contain a specified percentage of ethanol blended in. Not only has this ethanol requirement reduced Americans’ vehicle mileage and cost taxpayers dearly, but it is also threatening America’s energy security by putting a bag of rocks on the backs of our nation’s small refiners and a bowl of cash into the hands of foreign countries.
Some believe that refiners can simply mix ethanol in themselves at just a slight inconvenience, but the reality is that most cannot for monetary reasons. Aside from the purely financial implications, ethanol blends degrade rapidly, meaning that the only refiners that can hand-produce this blend are those that sell gasoline directly to consumers.
While these lucky few can add ethanol onsite shortly before the mix is pumped into consumers’ cars, most refiners are left with just two choices.
The first option is to buy surplus RINs credits — the ethanol receipts that Washington uses to measure RFS compliance — from the big, vertically-integrated oil firms that can mix onsite. Because so few refiners can concoct the government’s ethanol blend, trading these high-in-demand RINs credits has turned into a highly profitable business. Their price has spiked by over 1,000 percent since the program began — an excellent deal for Big Oil, but a bad one for everyone else. It’s no wonder these large refineries formed a coalition that advocates retaining the status quo.
The second option they have is to purchase costly ethanol mixes from overseas — not due to a real desire for this fuel, but to obtain more of these government ethanol receipts to appease government bureaucrats. This option is also costly and serves as an artificial stimulus to imports, violating the Trump administration’s energy goals.
Neither of these choices are good for America. While American refiners could still compete with the bag of rocks on their backs for a few years, they are now understandably falling far behind.
Recently, Philadelphia Energy Solutions — the northeast’s largest refiner — declared bankruptcy because of this RINs program. These ethanol receipts cost the company $800 million since 2012 and are now the business’ second largest overall business expense — twice as much as even its annual payroll costs. More refinery insolvencies are on the not-too-distant horizon as well.
America’s energy security is on the line here. Past studies have shown that for every oil refinery layoff, 61 jobs are affected across the nation at large. Soon, Washington could become nearly reliant on Texas to keep America’s energy secure. With Hurricane Harvey fresh in everyone’s minds, the danger of relying too heavily on any one state should be clear.
America’s refiners can only compete if the White House gives them a level playing field. Until that time, foreign nations will continue to reap financial gains from this unnecessary red tape.
Today, RINs credits increase our self-inflicted trade deficit. But tomorrow, the program could make us the latest victim of Iran and Russia’s diplomacy-threatening energy price gouging if the administration does not stop this trend of increasing energy dependency.
Thankfully, some administration officials — including EPA Administrator Scott Pruitt and Agriculture Secretary Sonny Perdue — recognize the need to reform RINs, which is why they presented the president with a reform proposal at the end of last month.
The president should stick with his campaign promise, not sell out his principles for the ethanol lobby. The ethanol lobby reflects the interests of lobbyists, not the general thoughts of any given state. The last two Republican winners of the Iowa caucus grasp this reality, which is why they never pandered to this particular interest group and have already gone out of their way to endorse RINs reform.
If the results of the last presidential election taught the world anything, it’s that trying to be something to everyone always leads to failure. For the sake of our energy security, I hope Trump understands this and does the right thing.
Joey Bradfield is a campaign consultant and a former staffer for Sen. Rand Paul, R-Ky., and former Gov. Gary Johnson of New Mexico.
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