Agricultural News
Renewable Fuels CEO Thanks Obama Administration for Defense of RFS
Fri, 27 Jul 2012 09:48:48 CDT
Obama Administration statements rebuffing "alarmist calls" for the need to waive the Renewable Fuel Standard (RFS) are absolutely correct, wrote Renewable Fuels Association (RFA) President and CEO Bob Dinneen in a letter to Agriculture Secretary Tom Vilsack and EPA Administrator Lisa Jackson.
"Both of your agencies have responsibly answered the panicked appeals to modify or dismantle the RFS, stating plainly that consideration of waiving the program is simply not warranted. Your comments have provided the kind of certainty and security that is necessary to ensure the renewable fuels industry continues to evolve. Further, your agencies' recent remarks regarding the RFS serve as important signals to the investment community that the nation's commitment to diversifying our fuel supply and creating a future market for new advanced biofuel technologies remains intact," Dinneen wrote.
Specifically, Dinneen addressed concerns caused by the hot and dry weather by underscoring how the "tremendous flexibility built into the RFS program" was designed to accommodate marketplace anomalies like this summer's drought.
"The ability of obligated parties under the RFS to "bank" excess Renewable Identification Number (RIN) credits and use them for compliance in the following year provides a significant measure of flexibility that takes pressure off of the corn market in the event of a short crop," wrote Dinneen.
Dinneen pointed to the estimated 2.4-2.6 billion RINs available and recent analysis by Professor Bruce Babcock at Iowa State University that found a waiver might result in only a 4.6% reduction in corn prices.
Professor Babcock concluded that, "The desire by livestock groups to see additional flexibility in ethanol mandates may not result in as large a drop in feed costs as hoped." He further found, "-the flexibility built into the Renewable Fuels Standard allowing obligated parties to carry over blending credits (RINs) from previous years significantly lowers the economic impacts of a short crop, because it introduces flexibility into the mandate."
Dinneen also confronted erroneous contentions that ethanol demand for corn was inelastic as a result of the RFS requirements. Dinneen noted that, "Since the first week of June, which is when corn prices began to surge in response to worsening drought conditions, ethanol consumption of corn has fallen nearly 14 percent and is at a two-year low. In this same period, corn export inspections actually increased 15 percent."
"When all the facts are on the table, it becomes abundantly clear that waiving or altering the RFS in any way at this time would not be prudent, nor would it have any meaningful impact on corn prices or availability for feed use. Clearly, market signals and the flexibility of the RFS are already working to ration demand in anticipation of a shorter-than-expected grain crop. Still, even if ethanol production is significantly reduced as a result of tighter supplies of corn in 2012/13, obligated parties should have very little difficulty in meeting their obligations under the RFS for 2012 and 2013.," Dinneen concluded.
Click here to read the entire letter.
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