September 3 2013

Will Unrealistic Ethanol Policies Cost American Jobs?

Charlotte Hays

Fall is here and with it the bustle of the busiest part of the year.

But for many American families dependent on jobs in the refinery industry this fall is a nervous time—thousands of refinery jobs are at risk because of government ethanol policies.

If these workers lose their jobs, it will be fair to call it a man-caused disaster.

Or an Environmental Protection Agency-caused disaster, as unrealistic renewable fuel standards are behind the looming crisis for families dependent on refinery jobs.

The Renewable Fuel Standard, enacted in 2005 by President Bush with bipartisan support, was designed to promote the laudable goal of energy security by requiring that fuel contain a percentage of renewable energy. As a Wall Street Journal op-ed piece this morning (subscription required) by Republican Rep. Patrick Meehan from Pennsylvania and AFL-CIO leader Pat Eiding notes, the RFS was enacted with good intentions.

Meehan and Eiding write that the “good news” is that each gallon of gasoline is now 10 percent ethanol blend. The “bad news” is that the Environmental Protection Agency is now mandating that refiners use more than that. They say that this is something refineries simply can’t do.

They explain:  

The Renewable Fuel Standard created a market-based compliance system in which refiners must submit credits to prove that the required amount of renewable fuel is used or paid for by them each year. These credits, known as Renewable Identification Numbers, can be bought or sold like commodities. Both refiners and blenders acquire RINs by either blending the renewable fuel or buying credits in lieu of blending.

As a display of regulatory failure at its finest, current regulations place the compliance obligation on refiners rather than on renewable-fuel blenders—allowing blenders to sell RINs to anyone, including Wall Street speculators—and fail to require any transparency in the RIN market. One result: a shortage of RINs for purchase by refiners, and a lack of clarity about who is acquiring them.

Another result is that the prices of RINs have gone up. The authors cite the plight of Monroe Energy in Trainer, Pa., whose annual costs for RINs will, as a result of the EPA mandate, be almost twice the reported $150 million the owners paid to buy the refinery in 2012. Many refineries are in the same predicament.

Meehan and Eiding conclude:

We need a solution for refineries struggling to comply with burdensome and mismanaged RIN credits, while balancing the intent of the Renewable Fuel Standard.

The Environmental Protection Agency's Aug. 6 announcement that it will consider reducing the renewable fuel volume mandate next year—while refusing to take action this year—is a far too tepid response to this crisis. Next year may be too late. The federal government owes it to the thousands of refinery workers across the nation not to imperil their jobs with ruinous regulations.

The president spoke at length on the need for jobs at the recent commemoration of the March on Washington.

He could protect a lot of jobs by calling the EPA.

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