POINT OF OBLIGATION - WHAT IT IS, WHY IT MATTERS


You have probably heard about the recent dustup in Washington, D.C. surrounding ethanol and a “deal” with some oil refiners regarding the Renewable Fuel Standard (RFS) point of obligation.

The vast majority of the ethanol industry, agriculture organizations, fuel retailers working to offer more E15 and even oil companies oppose any deal of this kind. Given the complexity of the issue, we wanted to clarify what’s at stake and why it would be bad for everyone involved.

What is the point of obligation?

Under the RFS, oil refiners must blend renewable fuel into the fuel supply. This is called the “point of obligation” as the refiners are responsible for complying with the law.

The rumored deal would move that obligation to the fuel retailers. In exchange, the ethanol industry would get an E15 waiver on Reid Vapor Pressure limits, allowing E15 to be sold during the summer months.

Why is this a mistake?

1. It throws the program into chaos.

The RFS has been law for over a decade, and the process is well established. The blending system has been built out based on this process. Any change would throw that into chaos. It would also set in motion a rulemaking process that would take a minimum 18 months and more likely several years to complete.

2. It would raise fuel costs at the pump by removing the retail incentive for E15.

Retailers today can capture the value of biofuels credits and pass that to consumers. They do this because low fuel prices attract consumers into their stores, where they can sell convenience items like drinks and candy. If the oil refiners aren’t obligated to comply, they have no similar reason for passing those savings on to consumers.

3. It would halt expansion of E15 and decrease ethanol sales.

Retailers have confirmed that expansion of E15 will stop if the point of obligation is moved. If current expansion efforts are halted, we would lose approximately 190 million gallons of new ethanol sales annually in the short term and more than half a billion gallons of new ethanol sales annually in the long term.

4. It would delay future RVO rulemaking.

Changing the point of obligation would require hundreds of new companies to demonstrate compliance – demanding new rules, new staff, new infrastructure and years of recalibrating a program that already works, and it would also likely delay future RVO rulemaking.

Changing the point of obligation would stop the momentum we have generated in growing E15 sales. The industry today is working on Reid Vapor Pressure limits on E15, and we do not need to sacrifice the integrity of a system that’s working today. In fact, a bill was introduced in Congress just this week that would address the RVP problem.

We’re working to send a strong message across America that there should be no changes to the RFS. We must remain strong and work together to ensure that clean, American-made biofuels continue to grow and change the world.

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