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LATEST IN ETHANOL WAR: Both ethanol and refinery interests are seizing on record fuel prices as a weapon in their unending war over the EPA’s Renewable Fuel Standard.
Industry groups on both sides of the standard are asking for President Joe Biden’s ear and pressing him to embrace their — mutually opposed — reforms if he wants to lower gas prices.
For the corn lobby, higher ethanol blending requirements would bring down costs because they reduce the volume of currently high-priced oil needed to produce fuel.
Meanwhile, refiners want not only lower volumes but a complete reform of the program and “right-sizing” of the RFS’s credit regime to lower their costs, and pump prices with them.
What the Biden EPA proposed: Under the RFS, EPA sets requirements for the blending of biofuels into the overall fuel supply.
EPA’s recent proposal, which has not yet been finalized, reduces retroactively the blending obligations for 2020. The coronavirus pandemic’s disruption to the fuel market and broader economy were cited as the reasons for the reduction.
Meanwhile, though 2021’s requirements were set to meet the amount of renewable fuel actually consumed, meaning additional blending wouldn’t be required, EPA proposed a significant increase to blending requirements for 2022 to include 15 billion gallons of ethanol.
The cases for change: Ethanol interests are lobbying the Biden administration to set higher requirements for 2020 and 2021 and to maintain the “steadily increasing volumes” provided for by statute rather than adjusting them down, as renewable fuel group Growth Energy said in its 600-page comment on EPA’s proposal.
The Biden administration is notably already counting on more ethanol as a price-lowering mechanism. EPA last Friday waived regulations for E15 fuel, allowing it to be sold nationwide throughout the summer months.
“We’ve seen E15 selling for as much as 60 cents less per gallon, and at a time with gas prices the way they are, it makes all the sense in the world to continue to make an affordable fuel choice available to American consumers,” Chris Bliley, SVP of regulatory affairs for Growth Energy, told Jeremy.
Bliley said the same logic would apply to the more common E10 and biofuels more broadly because they reduce dependence on oil.
On the other hand, some independent refiners and some labor unions argue the RFS is becoming (where not already) cost-prohibitive, threatening the industry and keeping prices high.
The problem is especially acute for small and merchant refiners who rely on the RFS’s Renewable Identification Number credit system, where prices are currently especially high, to meet their blending obligations, according to Brendan Williams, vice president of government relations for New Jersey-based refiner PBF Energy.
That gives an advantage to integrated energy companies, he said, who can more easily meet obligations because they control all phases of the refining, blending, and distribution process.
“Merchant refiners are spending more on RINs than they are on all other operating costs combined, everything other than buying crude oil,” Williams told Jeremy. “More than payroll, more than energy to run your plants.”
It’s adding anywhere from 20 to 30 cents per gallon to fuel, Williams said, because EPA’s Renewable Volume Obligations exceed what the market can consume.
“If the administration wants to do something to address gas prices that can happen relatively quickly, right-sizing the RVO could significantly reduce the cost of RINs on merchant refiners,” he said.
The Fueling American Jobs Coalition, a mixture of labor unions and independent oil refiners, launched a digital ad campaign last month asking Biden to tackle the “broken” RFS to reduce prices and sustain refinery jobs.
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ANOTHER PROPOSAL TO REDUCE FUEL PRICES: BUTANE: Leaders of three oil and gas industry groups are asking Sen. Joe Manchin to use his considerable power over energy policy in Washington and promote blending of butane into the fuel supply to reduce gasoline prices.
“Butane has always been relied upon as a historically cost-effective way to blend gasoline during periods of supply disruptions in the summer,” the executives of Kentucky Oil & Gas Association, Marcellus Shale Coalition, and Gas & Oil Association of West Virginia said in a letter they sent to Manchin yesterday.
“Today, butane is approximately $1.50 per gallon whereas the average price per gallon for Ethanol between January and April was $3.34,” they add, saying butane should receive the same waiver E15 received.
EU TWEAKS OIL EMBARGO IN BID TO WIN OVER HOLDOUTS: The European Commission proposed new changes to its sixth round of Russian sanctions today, seeking to give Hungary, Slovakia, and the Czech Republic more time to adapt to its embargo on Russian oil imports. Talks on the new proposal are expected to last late into Friday night, and come as EU ambassadors gather in Brussels to hash out the details of the proposal, and, in some cases, seek additional assurances for their countries.
According to new draft plans circulated to diplomats last night, the EU is now proposing giving Hungary and Slovakia until the end of 2024 to comply with the Russian oil embargo—12 additional months, compared to the rest of the bloc—and giving the Czech Republic an additional six months.
Hungary, Slovakia and the Czech Republic are deeply dependent on Russian crude, and have cited fears about the impact a ban would have on their economies.
Still, even the new timeline might not be long enough for Budapest: Earlier today, Hungarian Prime Minister Viktor Orbán said the EU commission’s proposed embargo amounted to a “nuclear bomb” for his country, which imports roughly 65% of its crude oil from Russia.
In an interview with local radio station Kossuth Rádió, Orbán pushed for an even longer delay for his country—five years, as opposed to one—and said the EU Commission has not considered how difficult it is for landlocked countries such as Hungary to reduce their dependence on Russian supplies.
Though he stopped short of saying he would veto the new proposal, Orbán said his country would not approve the plans "until the Hungarian issue is resolved."
It is unclear whether Slovak and Czech leaders would be amenable to approving the new timeline, or whether the EU is willing to give the countries in question a bit more runway. But diplomats said they expect talks to continue well into Friday night, if not even later into the weekend.
One official told Reuters that the extended deadlines for the three countries were calculated based on likely construction times for pipeline upgrades, which would allow them to bring in alternative crude supplies.
This official added that Hungary and Slovakia “accounted for only 6% of the EU's oil imports from Russia, and the exemptions would not change the impact of the ban on the Russian economy.”
German Chancellor Olaf Scholz urged solidarity with the landlocked European nations, saying in an interview yesterday the bloc “must also show our solidarity and readiness to help those countries that don’t have direct access to the Northern Sea or the Baltic Sea.”
This morning, top EU diplomat Josep Borrell said he will call a meeting of EU foreign affairs ministers next week if leaders failed to reach consensus over the weekend.
BIDEN ADMINISTRATION ANNOUNCES 60 MILLION BARREL BUYBACK PLAN: The Department of Energy said it will begin soliciting bids this fall to buy back 60 million barrels of oil to replenish supplies for the Strategic Petroleum Reserve, following the largest-ever release from the emergency stockpile in an effort to lower fuel prices and address a surge in demand.
The goal will be to replenish roughly one-third of the 180 million barrels Biden ordered released earlier this year, officials said.
In a statement, DOE said the government’s repurchasing strategy “will help encourage the production we need now to lower prices this year by guaranteeing this demand in the future at a time when market participants anticipate crude oil prices to be significantly lower than they are today[.]”
COMMENT PERIOD ON CHACO LAND WITHDRAWAL WINDS DOWN: Public comment ends today for Interior’s proposed mineral withdrawal around Chaco Canyon National Historical Park, a decision supported by New Mexico’s U.S. Senate delegation and various environmental groups but opposed by local Navajo who benefit from oil and gas leasing on lands near the park.
The department announced in November it would pursue a 20-year withdrawal of all lands, covering just over 350,000 acres, within a 10-mile radius of the New Mexico park, to preclude new mineral leasing.
Secretary Deb Haaland stressed at the time that the area has deep meaning for “indigenous peoples whose ancestors lived, worked, and thrived in that high desert community” and that it was “time to consider more enduring protections” – but not all indigenous groups support a withdrawal.
Leaders of the Navajo Nation, which has delegated lands adjacent to the buffer, say the withdrawal will discourage companies from setting up operations on Navajo lands. They say mineral leasing is the only way for tribal allottees to take advantage of the lands, as they aren’t conducive to farming or raising livestock, and have advocated for a 5-mile buffer compromise for years.
“For the very first time, the [Bureau of Indian Affairs] allowed them to have economic development by having a leasing pad for oil and gas on there, so that's an economic opportunity that's gonna get taken away from them,” Navajo Nation Speaker Seth Damon said after the withdrawal was proposed.
Some oil and gas industry groups have also opposed the withdrawal. The Western Energy Alliance, which primarily represents federal-land operators, said in its comment on the proposal BLM “should recognize it has a congressionally mandated multiple-use mission” and that it “must be honored and not compromised by the single-use land management objectives promoted by certain single interest groups.”
Whether or not the withdrawal is finalized, the targeted lands will be segregated through November 2023 while the Bureau of Land Management performs an environmental analysis.
BOEM ADVANCES OFFSHORE WIND OFF CALIFORNIA COAST: The Bureau of Ocean Energy Management issued results of an environmental review yesterday favoring new offshore wind development off the coast of California.
BOEM’s concluded leasing of 132,369 acres of federal waters within the Humboldt Wind Energy Area, situated 20 miles off the northern California coast, would have no significant environmental impact.
Most of BOEM’s recent leasing activities have involved acreage in the Atlantic, but an Interior plan released in October expressed the department’s intention to potentially hold seven lease sales for offshore wind by 2025, including in waters off the Oregon and California coasts.
DOE NUCLEAR OFFICE GETS NEW HEAD: The Senate confirmed Kathryn Huff yesterday to be assistant secretary for nuclear energy in an 80-11 vote.
Huff, who has served as the Office of Nuclear Energy’s principal deputy assistant secretary since May 2021 and previously led the Advanced Reactors and Fuel Cycles Research Group at the University of Illinois at Urbana-Champaign, received unanimous support when the Senate Energy and Natural Resources Committee voted on her nomination in March.
Secretary Jennifer Granholm called Huff a “trailblazer for her entire career” and said she brings “endless enthusiasm and curiosity to her work.”
BIDEN ENERGY POLICIES DISAPPOINT FAR AND WIDE: The Biden’s administration has sought something of a middle ground with several of its recent actions related to energy policy, but they’re still leaving trails of disappointment all around, Jeremy writes for our latest magazine issue.
New oil and gas lease sales will happen, but they’ll be smaller and royalties will be higher. That the sales will happen at all angers environmental groups. But the fewer acres and a higher take from yields has set off oil and gas trades.
The administration’s support for additional natural gas production, and for new infrastructure with it, has left the same green constituencies unhappy.
At the same time, the White House’s newly proposed reforms to NEPA, which roll back the Trump-era ones, have the oil and gas industry saying the new NEPA approach undercuts Biden’s goal on gas.
Read more about who’s miffed and why here.
Bloomberg Opinion Europe goes for the knockout on Russian oil
Politico Congress fires its first warning shot on Biden’s Iran deal
AP Growing African mangrove forests aim to combat climate woes
WEDNESDAY | MAY 11
10:00 a.m. 406 Dirksen The Senate Environment and Public Works Committee will hold a hearing on oversight of the Council on Environmental Quality.
THURSDAY | MAY 12
10:30 a.m. 2123 Rayburn House Energy and Commerce’s Energy Subcommittee will hold a hearing titled “Modernizing Hydropower: Licensing and Reforms for a Clean Energy Future.”