Following U.S. EPA's release of its proposed 2018 renewable fuel standard requirements, what changes is the industry hoping to see to the proposal, and how is it engaging with the agency on volume targets? During today's OnPoint, Bob Dinneen, president and CEO of the Renewable Fuels Association, reacts to the proposal and discusses the Trump administration's overall attitude toward renewable fuels.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Bob Dinneen, president and CEO of the Renewable Fuels Association. Bob, thank you for coming back on the show. Nice to see you.
Bob Dinneen: Oh, thanks for having me again. Appreciate it.
Monica Trauzzi: So, Bob, a busy time. This month, EPA released its proposed 2018 renewable fuels standard requirements. They are lower than the 2017 requirements. Conventional biofuels remain the same, advanced see a slight dip. Do you take the overall proposal as a sign of the Trump administration's support for your industry?
Bob Dinneen: Well, we're certainly pleased that the proposal maintains the 15 billion gallons for undifferentiated biofuels for which corn ethanol applies. We think that does indeed reflect the president's commitment to ethanol generally and the renewable fuel standard specifically, and we were watching pretty carefully for that. And frankly, there would have been no justification to have reduced that number, so we weren't necessarily terribly surprised, but we were pleased to see that.
With respect to the slight reduction in advanced biofuels, I think EPA's sort of in a tough spot because of where the courts have put them in the past, saying you can't be aspirational, you have to promulgate a renewable obligation for those fuels, for advanced and cellulosic fuels that reflect what is going to happen or to your best ability make a good estimate.
But I do think that EPA perhaps has not fully accounted for the potential for growth, and I want to understand the metric that they've used in coming up with this reduction a little bit better. For example, this reduces the number from 311 million gallons for cellulosic last year to 238 million gallons, but only 17 million gallons is assumed to be cellulosic ethanol. The rest is really renewable diesel, which has been growing. But EPA doesn't assume any growth at all in cellulosic ethanol from existing facilities with corn fiber technology, and I want to be able to look at that a little bit deeper, convey to EPA that, quite frankly, there's few ethanol producers in the country that are not looking at fiber technology that would dramatically expand cellulosic ethanol production.
So I think we've got to better understand where EPA is coming from and better educate them as to the potential for growth. I just came from a technical conference in Minneapolis last month in which virtually every ethanol producer I ran into is talking about an expansion based on that new technology. So EPA needs to know that, and I think that there's still some room before a final rule to educate them as to what the potential truly is.
Monica Trauzzi: So how have you been engaging with the Trump EPA on all of this prior to the proposal, and how do you hope to engage with them moving forward, and how is this EPA different than the Obama EPA?
Bob Dinneen: Well, this EPA isn't fully in place yet because there are only a few political appointees at the agency. I mean, we continue to talk to the folks we've always talked to, the career employees that have worked awful hard on this program, but until there are some of the other political appointees there to discuss, it's a little bit hard to engage with them. But how is this different from the last administration? Right now, very little. Forty million gallons difference, so we're going to continue to work with the agency, though, and like I said, try to get that number to reflect what we really do believe is going to be possible next year as these new technologies are commercialized.
Monica Trauzzi: EPA signaled it would begin a technical analysis to inform a future rule to reset volumes. How likely do you believe a reset is?
Bob Dinneen: I think a reset is very likely for advanced and cellulosic fuels. Frankly, I've been a little bit surprised that the agency has not begun that process already given that that reset trigger was set, you know, a couple years ago. But I think that that's fair. Again, EPA needs to truly evaluate what the potential is and, you know, hopefully continue to drive growth in that market and investment in that market. This year, with this proposal is the very first time they will begin to hit the reset trigger for conventional biofuels as well because this actually reduces the overall RFS by 26 percent, and it is probably likely that they'd have to reduce it by at least that much next year, and so two years of more than 20 percent, and EPA would have the ability to reset the overall numbers as well.
So again, we're concerned about it, and we're going to continue to watch that and work with the agency to make sure that in a reset scenario, that they are following the law and recognizing the potential for growth and driving investments in these new technologies, which was the whole point of the renewable fuel standard in the first place.
Monica Trauzzi: We always go back to the question of what Congress might and could do. Do you think Congress could be motivated to revisit the RFS under the current scenario?
Bob Dinneen: Well, look. I think Congress is going to continue to evaluate the program. It's sort of their oversight responsibility to do so. Whether or not that results in legislation or not, I'm not smart enough to tell you I believe that the RFS continues to do its job and has been an extraordinarily successful program by any measure, whether you're looking at how it has helped to reduce energy imports, gasoline imports, how it has helped to lower the cost of consumer gasoline at the pump, how it has revitalized rural American, how it has stimulated investment in new technologies. By any measure, the RFS has been a success, and we want to make sure that that success continues. We don't want to take all that we have done in this country and concede it to the Chinese or somebody else that is looking desperately to grow renewable energy technologies. We've done it here. Let's continue to do it here.
Monica Trauzzi: I'm curious what the state of discussion is among your member organizations considering the current political climate and the current market conditions. What are conversations like among your member orgs?
Bob Dinneen: Well, look, the market is a tough place right now. Price of oil and the price of our feedstock have made it a pretty tight margin to compete in, but we're doing just fine. The industry is continuing to grow. Now, we're growing largely because we're exporting more and more of our product, and while that's fine, the export market can be fickle, and we recognize that we are not maximizing the amount of ethanol that could be used, could be blended right here at home. You know, we want to grow the 15 market. We want to get to a place where higher octane is being utilized by higher compression ratio engines. And, you know, there is a great deal of growth potential right here in the United States. We ought not rely upon, you know, a growing market in India or a sugar market in Brazil that's encouraging exports to that country or, you know, expanded market opportunity in Mexico. Let's make sure that we are using clean burning, renewable U.S. fuels right here at home. And we can do that.
Monica Trauzzi: All right, we're going to end it right there on that note. Thank you for coming on the show. Nice to see you as always.
Bob Dinneen: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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