The U.S. Environmental Protection Agency is reportedly considering a temporary waiver of ethanol blending mandates as part of its response to collapsing oil prices caused by the Coronavirus outbreak.
The Renewable Fuel Standard (RFS) is a market-distorting regulation that requires fuel blenders to use an amount of biofuel beyond consumer demand while raising costs and imposing economic harm, a reality highlighted by the Coronavirus outbreak.
The energy industry is in the midst of a severe demand crunch as travel restrictions and government-imposed stay at home orders have severely curbed consumer need for fuel as gasoline demand has fallen by over 30%. The crisis was only exacerbated by a Russia-Saudi Arabia oil price war that sought to leverage the pandemic to kill off competition. As the sharp demand cut causes production to slow and workers to be furloughed, the RFS forces refineries to comply with standards by using costly biofuels or by purchasing credits based on projected consumption – projections that are now entirely off base for 2020. The cost of compliance with RFS requirements in the face of rock-bottom demand from consumers threatens to push some refineries towards shutting down production entirely, costing thousands of workers their jobs in the process.
Americans for Tax Reform urges the Trump EPA to use its authority to waive biofuel requirements for the remainder of 2020 and allow blending volumes to match consumer demand. Issuing waivers from RFS requirements is well within EPA’s existing authority under Section 211(o)(7) of the Clean Air Act. Temporary suspension of RFS requirements will reduce artificially added costs for fuel producers (which ultimately get passed on to consumers) and will help them maintain production and keep workers on payroll.
News that the EPA is considering waiving biofuel requirements under the RFS for the remainder of 2020 comes after a bipartisan group of governors urged the EPA to take action in a letter sent last week.
The letter, signed by Texas Gov. Greg Abbott (R), Oklahoma Gov. Kevin Stitt (R), Utah Gov. Gary Herbert (R), Wyoming Gov. Mark Gordon (R) and Louisiana Gov. John Bel Edwards (D), argues that “the macroeconomic impacts of COVID-19 have resulted in suppressed international demand for refined products, like motor fuels and diesel.” Having to add ethanol “present[s] a clear threat to the industry under such circumstances,” the governors added.
Temporarily waiving RFS requirements is in line with the host of deregulatory actions taken to remove regulatory burdens dragging down American economic growth – now all the more important in the face of the current global crisis. ATR urges the Trump Administration and the EPA to temporarily suspend RFS requirements and to continue removing barriers to America’s economic recovery.