The People of America's Oil and Natural Gas Indusry

Shifting RFS Responsibility Could Impact Consumers

Mark Green

Mark Green
Posted February 16, 2017

Changing the point of obligation under the federal Renewable Fuel Standard (RFS) – moving it closer to U.S. consumers – continues to distract from the real problems with the RFS that Congress should address, either by repealing or significantly reforming the program. Meanwhile, with a public commenting period on the proposal ending next week, a number of groups caution that the change could result in motorists paying more for gasoline.

At issue is an effort to have EPA shift responsibility for RFS compliance from refiners and importers to independent blenders and retail gasoline stations. A survey of U.S. voters last fall by Penn Schoen Berland found 86 percent believe it’s likely that changing the RFS point of obligation will result in higher prices at the pump. Bloomberg reports on what other trade associations are saying:

Tweaking the law would raise consumer fuel prices and increase costs for the EPA to regulate the mandate at a time when government spending is increasingly scrutinized, said David Fialkov, vice president of government relations for the National Association of Truck Stop Operators.

And:

“American consumers will ultimately absorb the impact,” said Kristin Clarkson, an (American Association of Railroads) spokeswoman.

Some retailers have weighed in directly with EPA, ahead of the close of the official comments period on Feb. 22. Max McBrayer, chief supply officer for RaceTrac Petroleum:

Should EPA change the point of obligation … many entities that currently buy fuel above the terminal may move further downstream, reducing competition at the rack. With fewer competitors, fuel wholesalers will have even fewer incentives to price competitively at wholesale. Reduced competition at wholesale is bad for large and small retailers alike, and means higher prices at retail for consumers.

And Wawa’s Brian Schaller, vice president of fuel:

Wawa's fuel offer has always been aimed at retailing the specific fuels our customers demand. In fact, there are numerous challenges currently facing retailers with respect to blending ethanol into gasoline above 10% … Shifting the obligation as the Petitioner has outlined is likely to result in the ultimate consumer facing higher fuel prices, similar to how state and federal taxes are handled.

Given that the RFS already is trying to put consumers at risk – in effect, attempting to push higher ethanol-blend fuels like E15 into the marketplace that could damage vehicle engines and fuel systems – EPA should reject a change in the point of obligation that could bring about higher pump prices. And again, this tinkering would only add complexity to a program that’s already broken. It’s time for Congress to repeal the RFS or reform it in major ways. Frank Macchiarola, API downstream group director:

“The bottom line is no one should be obligated to enforce the defective RFS program, and Americans should not be forced to pay more at the pump because of it.  The Congressional Budget Office found that forcing ethanol consumption to statutory levels, mainly by using higher ethanol blends like E85, could cost consumers an additional 26 cents per gallon at the pump.  Moving the point of obligation does nothing to relieve potential pressure on consumers created by this mandate.”

ABOUT THE AUTHOR

Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.