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Senators struggle to find common ground over biofuels

Photo courtesy of the Iowa Corn Growers Association (ICGA)

Senator Ted Cruz (R-TX) is keeping a tight hold on Iowa Secretary of Agriculture Bill Northey’s nomination for USDA Under Secretary. Senator Chuck Grassley (R-IA) explains what it will take for Senator Cruz to lift his hold.

Senator Cruz (R-TX) suggests the Environmental Protection Agency (EPA) put a 10-cent cap on Renewable Identification Numbers, or RINs. Bruce Babcock, UC Riverside professor of public policy, describes RINs as the market-base tool used to keep track of the petroleum industry’s compliance of the Renewable Fuel Standard (RFS).

“The Renewable Fuel Standard wants a certain quantity of biofuels blended into the gasoline and diesel fuel market. RINs are the mechanisms that create incentives for buyers to buy the biofuels,” Babcock said. “It’s a key part of making sure that the goals of the Renewable Fuels Standard are met in terms of the amount of biofuels blended into the fuel supply.”

Babcock say capping RINs at 10-cents would decrease blending incentives which would later lead to not enough biofuels being blended.

“The RIN price is supposed to create the required incentive to blend the volume of biofuels, specified in the RFS, into the fuel supply. If the RIN price is 80-cents, that reflects an 80-cent incentive for blenders to buy biofuels and blend them in the fuel supply,” Babcock said. “That doesn’t create a strong enough incentive to blend the required amount of biofuels into the fuel supply.”

Senator Grassley recently spoke to Senator Cruz. Grassley says the conversation brought little progress and the senators were looking at different approaches.

Senator Grassley says Secretary Northey deserves to appear before the full Senate. However, Grassley says approving a 10-cent cap on RINs is not the right approach.

“My position is – that’s going to destroy the ethanol industry, and there’s other ways around it,” Grassley said. “The summer sale of E15 will very much solve the RIN problem.”

Senator Deb Fischer (R-NE) last year re-introduced the Consumer and Fuel Retailer Choice Act. The Act would amend the Clean Air Act and allow for the year-round sale of higher blends of ethanol, such as E15. Senator Grassley believes Senator Fischer’s Act is “the only real solution to help E15 and get around the issues.”