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Potential RFS changes upset biofuels industries

WASHINGTON — Rumors of potential changes to the Renewable Fuel Standard are creating some concerns in the biofuels industries.

Renewable Fuels Association President and CEO Bob Dinneen has reported a White House official told him a coming executive order would move the "point of obligation" — or party responsible for blending biofuels into fuel — off refiners and onto someone farther down the supply chain, along with allowing E15, which is gasoline that contains 15 percent ethanol, to be sold during the summer months.

While the White House has denied that such an order is coming, the denial hasn't stopped prices from shifting for crops involved in biofuels. And it certainly hasn't stopped anxieties over the possible changes for people in the ethanol industry.

Jeff Zueger, chairman of the North Dakota Ethanol Council, says the proposed changes to the RFS could destabilize it to a point where the standard, which requires transportation fuel sold in the U.S. to contain a minimum volume of renewable fuels, cannot be maintained.

Under the current system, refineries blend the renewable fuels into gasoline or diesel to send down the supply chain. Zueger explains refineries have the infrastructure in place to do so, and they can, for instance, produce a gasoline that lends itself to being blended with ethanol in order to raise its octane and lower its price. If refineries are not the ones who have to make sure the renewable fuels get into the fuel, they would have no incentive to produce the product that lends itself to blending, which could increase consumer costs.

There are about 140 refineries who are obligated to comply with the RFS, Zueger says. If that obligation were passed down the line, it would affect about 10 times that number of wholesalers. The wholesalers who would have to make sure enough renewable fuel was added do not have a system in place to do so, and the Environmental Protection Agency would have a difficult time managing the program effectively, he says.

"It would not be efficient if you move that obligation downstream," Zueger says.

He says the move would bring "quite a bit of disruption" to the biofuels industries, which could endure until new systems are created.

The industry has reached out to members of Congress and others for support. Sen. Heidi Heitkamp, D-N.D., says it is important to keep the RFS as it is now.

"I don't think we need to compromise on any of it," she says. The move to sell E15 in the summer already should happen, she says.

Heitkamp says it's rare to find areas of consensus from the ethanol industry and fuel wholesalers, but the point of obligation is something they all seem to agree on. Since about 50 percent of North Dakota corn goes to ethanol production, she says keeping the RFS in tact also is important to the state's farmers.

Shifting responsibility for compliance from large refineries to fuel wholesalers, which include many small businesses, "is just a non-starter for me," Heitkamp says.

Zueger says he and other industry officials are working with national trade organizations to make sure their message is clear that changing the RFS would be bad for industry and consumers. They also want to educate the public about why the current system is working.

"Taking away choice is never good for the consumer," Zueger says. "Putting the RFS at risk essentially takes away choice."

Heitkamp says the rumors and jockeying on the issue seem to be driven by people with interests in refineries, and she speculates that perhaps some of them believe their "seats at the table" are larger than they really are. But the ongoing concern is that there are people within the Trump administration's circle of influence who would like to see the RFS drastically changed or gone, she says.

Heitkamp has been a strong supporter of President Donald Trump's choice for agriculture secretary, Sonny Perdue. No dates have been set for Perdue's confirmation hearings as he continues to work on the necessary paperwork for the position, and Heitkamp says it's unfortunate there is no voice for agriculture within the Cabinet right now.

Heitkamp says she's working on a letter to the administration to lay out her concerns. And she says people with concerns about agriculture issues need to make sure their voices are heard. Rural America produced a lot of votes for Trump, and those voters need to watch and make sure they aren't being forgotten, she says.

"We're not going to get rid of the system we have without actually improving it and making it a stronger system for our farmers," Heitkamp says.

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