ETHANOL

'RINsanity' hits Hill as lobbyists rush in

Competing lobbyists for ethanol and petroleum industries have swarmed Capitol Hill to talk about spiking prices for biofuel credits.

Each side is offering its take on a complicated problem that's not for the faint of heart -- or mind. At issue are the connections between ethanol credits, the renewable fuel standard and gasoline prices.

It was not fodder for power breakfasts until the price for the ethanol credits called Renewable Identification Numbers -- known as "RINs" -- spiked two weeks ago to more than $1, up from its January level of about 7 cents. Since then, the price has continued to jump and fall, and it's unclear where it will eventually settle (Greenwire, March 18).

The issue now has a Washington nickname -- "RINsanity" -- and lobbyists are working it hard.

On Wednesday, Sens. David Vitter (R-La.) and Lisa Murkowski (R-Alaska) demanded answers from U.S. EPA on RIN prices, and Senate Energy and Public Works Chairman Ron Wyden (D-Ore.) is planning to send his own letter to EPA with questions about asking about the prince swings, a panel spokesman said.

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In the House, the Energy and Commerce Committee released the first in a series of white papers on the renewable fuel standard. And Rep. John Shimkus (R-Ill.), an ethanol supporter, gave a floor speech this week urging the media to not blame renewable fuels.

"There are questions that need to be asked on why such swift dramatic price shifts are being reported in the market," Shimkus said.

Refiners blame the spike on the "blend wall," the so-called technically feasible level of ethanol saturation in the market. According to many analysts, refiners are spooked about reaching the blend wall and having to comply with EPA's requirement that 13.8 billion gallons of ethanol be used in motor fuel this year. Instead of purchasing physical gallons of ethanol, they are buying up the credits, which the agency allows refiners to use to meet the target.

While there are many uncertainties in the market, refiners say the bottom line is that the spike in ethanol credits will contribute to higher gasoline prices. They argue that the renewable fuel standard, or RFS, which mandates levels of both conventional ethanol and advanced biofuels each year, is to blame.

In response, ethanol producers have mounted a fierce defense. They blame high gasoline prices on refiner margins. The blend wall wouldn't be an issue, they say, if refiners agreed to make investments in infrastructure and blend more ethanol in their fuel.

The back-and-forth reached a high point this week as lawmakers began talking about RINs and ethanol and oil lobbyists have been meeting with lawmakers and staffs of the House Energy and Commerce Committee and the Senate Environment and Public Works Committee -- both of which have jurisdiction over the renewable fuel standard.

Fuels America, a coalition of biofuels, agriculture and national security interests, has also had biofuel CEOs on Capitol Hill this week to tout the industry's progress.

Bob Dinneen, president and CEO of the Renewable Fuels Association, said that he hadn't gotten the sense that many members were paying a great deal of attention to the issue but that the House and Senate energy and environment committee offices he had met with had a healthy dose of skepticism that ethanol credits could be linked to gas prices.

"I think they're putting this into perspective," Dinneen said.

But whose perspective?

The American Petroleum Institute maintains that there's considerable interest on the Hill, given that a study the group released this week warned of dire economic costs should the RFS be kept in place. The study, which API funded, predicted a 30 percent increase in gasoline and a 300 percent increase in diesel costs by 2015.

Letters, white papers

This week, Senate Environment and Public Works Committee ranking member Vitter and Energy and Natural Resources Committee ranking member Murkowski warned EPA that the RIN spike could have a "dramatic impact" on the economy.

"It is imperative that EPA act decisively," they wrote. "Accordingly, we ask that you utilize any and all existing regulatory authority and flexibility to address the issue of rising [credit] costs and alleviate the threat of increased consumer fuel costs."

Wyden spokesman Keith Chu said in an email that his boss "is not jumping to any conclusions about how ethanol is impacting on consumers or gasoline prices. But given the volatility in the RINS market in recent weeks, he is planning to send a letter to EPA this week that will ask them to provide more information about why we're seeing these price swings."

House Energy and Commerce Chairman Fred Upton (R-Mich.) and ranking member Henry Waxman (D-Calif.) released the first of several white papers they plan to issue on the RFS. The paper dealt with the blend wall and is not directly related to the price spike, according to a committee spokeswoman, but it will help serve as preparation for hearings that the lawmakers plan to hold this summer.

"It has been more than five years since the RFS was last revised, and we now have a wealth of actual implementation experience with it," the white paper says. "In some respects, the RFS has unfolded as expected, but in others it has not."

Michael Frohlich, a spokesman for the group Growth Energy, said in an interview that all the concerns about the RFS are "overblown" and that there's no correlation between high gas price and ethanol RINs. He accused the oil industry of driving a misinformation campaign; oil companies, he said, simply don't want to give up their market share to ethanol.

But, he acknowledged, the gas price message is one that's resonating on the Hill.

"Gas prices are an issue that lawmakers are always going to try to be in tune with because it's something they want to make sure to help their constituencies with as much as possible," he said.

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