The national average for gas prices has surpassed $4.50 per gallon, up roughly 45% from a year ago. If Congress passes a bill that allows for year-round higher ethanol content in gasoline (“E15”) without protecting small refineries, Americans’ pain at the pump will only get worse.
The proposal moving through Congress would permanently allow E15 to be sold year-round. The issue is not the use of ethanol, or even higher blends, for that matter. Rather, the problem is a 20-year-old mandate that requires ethanol to be blended into the fuel supply.
The Renewable Fuel Standard (RFS) requires refiners to mix biofuels into America’s gasoline supply, primarily by using corn-based ethanol. Each domestic refiner must have a percentage of its domestic sales be blended ethanol.
Refiners have the option to meet part of their obligation by buying credits, known as renewable identification numbers (RINs). The Environmental Protection Agency requires RINs to track and hold refiners accountable for meeting government-mandated renewable-fuel volumes.
The RFS and RIN obligations raise fuel prices. RINs are trading roughly between $1.65 and $1.95. The costs move through wholesale markets and supply chains and ultimately show up at the fuel pump. At those levels, the cost embedded in a gallon of gasoline is on the order of 20 to 30 cents.
For small refineries, RFS compliance can be one of the most significant expenses. Small refineries operate in constrained regional markets, often without blending infrastructure, with thinner margins, and competing against larger, integrated firms. For small refineries, RINs are a direct, volatile cost that can drive them out of business.
Congress knew this back in 2005 when it wrote the law, enabling Small Refinery Exemptions (SREs) to prevent “disproportionate economic hardship.” The current legislative proposal would strip these exemptions away for good, which is a surefire way to force refinery closures and drive up gas prices.
The RIN system is also rife with fraud and continues to be manipulated. Earlier this year, federal prosecutors secured a guilty plea from a biodiesel executive in Florida who generated millions of dollars in fraudulent RIN credits by overstating production and backing it up with false documentation.
Ethanol advocates often argue that refiners can purchase ethanol rather than buy RINs. But that misunderstands how the system works.
Purchasing ethanol alone does not satisfy compliance obligations because the ethanol must be physically blended into finished fuel before the associated RIN can be used. Therefore, refiners without blending or retail operations remain dependent on buying RINs from third parties, exposing them to volatile compliance costs they cannot fully control.
Refiners have repeatedly proposed reforms to preserve renewable fuel blending while reducing distortions and compliance costs. Independent refiners that do not own blending or retail operations have proposed allowing the parties that blend ethanol to separate and transfer RINs more efficiently through the market, aligning compliance responsibility with the entities making blending decisions.
Refiners also proposed allowing exported gallons of ethanol to retain compliance value through associated RINs, recognizing that those exports still reflect domestic renewable fuel production. The ethanol industry opposed both reforms. That opposition reveals an uncomfortable truth: this debate is less about expanding consumer choice and more about preserving an artificially constrained RIN market that benefits certain participants at the expense of small refineries and consumers.
The case for repealing the RFS is stronger today than when it was enacted. The RFS has been an economic failure, entrenching benefits for special interests while shifting higher fuel and food costs to hardworking families.
It has also been an environmental failure, incentivizing more crop production at the expense of wildlife habitat and water resources, with negligible greenhouse gas reductions.
Ultimately, the use of biofuels should be determined by market needs rather than government mandates. That level certainly would not fall to zero, as corn-based ethanol is an important oxygenate that helps gasoline burn cleaner and meet octane standards.
At a minimum, SREs should not be treated as a loophole to eliminate. They are a necessary safeguard that reflects the uneven way the mandate lands across the refining sector. Maintaining the exemption process relieves pressure on smaller operators and limits cost spillovers to consumers.
Want to sell E15 year-round? Go for it.
Just don’t force it on the consumers who don’t want it, and don’t eliminate the only relief mechanism for the small refineries that can’t afford it. If E15 truly offers superior economics and strong consumer demand, it should succeed on its own merits.
Nick Loris is the President of the Conservative Coalition for Climate Solutions and an Energy Fellow at the Abundance Institute
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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