In an interview with OPIS Biofuels last week, EPA Office of Air Quality and Transportation Director Chris Grundler was drilled about the RFS rule announcements. In the course of doing so he made a remark which sums up many people’s frustrations with EPA and the RFS: there is an acknowledgement of its problems, but little action has been taken so far to solve them.

Grundler mentions how the market struggles once it hits the blendwall, citing this as a reason behind EPA’s repeated delays on issuing rules:

“You don’t need to be an astute observer of policy to understand that when the market hit the blendwall, things got a lot tougher and more expensive to meet these volumes. And the RIN market responded. I don’t know why anyone was surprised by that. EPA predicted that in an economics paper published a long time ago.” 

He added:

“We weren’t surprised, although it was a little bit earlier than expected. But that of course provoked a lot of discussion in Washington about the policy, and a lot of people expressing their shock and surprise that RIN prices were going up as we approach the blendwall. None of us were.”

Grundler added that declining demand for gasoline once the blendwall was hit, and the market not moving as quickly as Congress envisioned, was creating constraints that could not be ignored in the 2014 rulemaking process. Not everyone, however, recognizes that the RFS is broken, nor sees the problems with rising RIN costs once the blendwall is hit. The Renewable Fuels Association President and CEO Bob Dinneen thinks that RINs are free – something that anyone with even a basic grasp of policy and economics knows to be complete nonsense.

Good news that EPA acknowledges that there is a problem with the RFS. Better news if Congress takes the necessary steps to repeal or comprehensively reform this broken piece of legislation.

AFPM Communications

Posted by AFPM Communications

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