Conservative Groups Oppose Compromise Effort For Ethanol

Tea Party and conservative groups criticized efforts by a bipartisan group of lawmakers to reach a compromise that that would freeze the U.S. mandate for corn-based ethanol, even before a deal is worked out.

 

Conservative Groups Oppose Compromise Effort For EthanolEnd it, don’t mend it, they argued.

“The only reform to this failed government mandate should be to repeal the RFS,” Tea Party Nation, Americans for Tax Reform and 19 other groups wrote in a letter to lawmakers today. “Let consumers and the marketplace determine how much ethanol should be blended with fuel.”

The criticism shows the difficulty lawmakers may face in revamping a program that’s supported by corn growers and ethanol makers, and opposed by refiners, chicken producers, restaurant groups, anti-hunger activists and some environmentalists. House negotiators met with lobbyists for corn and ethanol makers today to urge them to support the reform package they are working to pull together.

Representative Fred Upton, chairman of the House Energy and Commerce Committee, and Representative Henry Waxman, the panel’s top Democrat, are negotiating changes to the Renewable Fuels Standard that would keep the ethanol requirement at this year’s level for the next two years and add incentives to boost low-carbon biofuel, according to people familiar with the talks who asked not to be identified discussing the sensitive talks.

Exxon Mobil (XOM)

Under the Renewable Fuel Standard, refiners such as Exxon Mobil Corp. must use a certain amount of those fuels each year, with their target determined by their share of the fuel market.

If refiners don’t make or buy enough renewable fuel, they can buy credits for it, known as Renewable Identification Numbers, on a market. Those RINs had surged this year.

The price for this year’s RINs hit $1.43 on July 17, up from 7 cents at the beginning of the year. It fell 6 cents to 46 cents today. Next year’s credits began trading at 68 cents on August 9, and fell 15 percent to 45 cents today on news of the congressional negotiations.

The 2007 law mandates the use of 13.8 billion gallons of ethanol this year and 14.4 billion gallons in 2014 and 15 billion in 2015. Lobbyists for refiners such as Valero Corp. (VLO) say that requirement is too high.

The additive is typically sold at filling stations, mixed in a formula of 10 percent ethanol to 90 percent gasoline. The oil industry says escalating requirements for ethanol would force them to sell blends exceeding 10 percent, a phenomenon known as “hitting the blend wall.”

If the lawmakers agree to cap the ethanol mandate as a percentage of gasoline use, which is what Waxman and Upton are discussing, refiners wouldn’t face that blend wall constraint. The discussions are still in flux, and there is no agreement on legislation in place, the people said.

Bloomberg

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