Policy trends we’ll be watching in 2018

January 17, 2018 By

January 15, 2018
By Megan Boutwell

Stillwater’s transportation energy policy experts closely follow federal, state, and international policy developments and their impacts on industry and consumers. As 2018 begins, there are a number of policy trends that we will be following and for which we’ll provide expertise to clients. The following are of some of the biggest policy trends we have our eye on.

At the federal level, we are observing how the new administration manages the Renewable Fuel Standard. The Environmental Protection Agency (EPA) finalized 2018 renewable volume obligations (RVOs) last November, lowering the Cellulosic RVO to 288 million gallons and increasing Biodiesel, Advanced Biofuel and total Renewable Fuel RVOs only slightly. As the price of Renewable Identification Numbers (RINs) continues to rise, refiners are looking for ways to change the RFS in order to ease compliance costs. Some of these ideas include:

  1. Senator Cruz’s proposal to add a $0.10 cap on RINs
  2. The addition of a new D8 RIN to encourage higher level renewable fuel blends
  3. Scrapping the RFS altogether

While these suggestions may not gain any more traction with EPA than the idea of moving the point of obligation, small refiners can still appeal to EPA for a waiver from their RVO if they can prove the RFS causes them “disproportionate economic hardship.”

On the renewable fuels producer side, we’re monitoring the impact of a few federal policies:

  1. The countervailing duties on soy-based biodiesel imports from Argentina and palm-based biodiesel from Indonesia put in place in 2017 to combat product from these countries being sold in the U.S. for below production costs. We will be analyzing the impact of these tariffs on U.S. biodiesel production and RIN prices.
  2. The possible reinstatement of the $1 per gallon biodiesel and renewable diesel blenders tax credit. Blenders of these fuels hope that the multi-year extension, which will be retroactive to 2017, will pass this month (although current conditions on Capitol Hill aren’t promising).
  3. The possibility of a national Reid vapor pressure (RVP) waiver for E15 and other mid-level ethanol blends. The ethanol industry has been lobbying for years to have an RVP waiver put in place in order to market blends of ethanol above E10. RVP standards aren’t the only thing standing in the way of the adoption of higher ethanol blends (auto manufacturer warrantees and fueling station infrastructure issues are also a challenge, just to name a few). However, an RVP waiver would be the first step to opening up the options for marketing E15.

At the state level, we are tracking all of the developments in California’s Low Carbon Fuel Standard (LCFS), Oregon’s Clean Fuels Program, and other LCFS programs in development around the country and in Canada. The Washington State Legislature is currently considering enacting their own LCFS with HB 2338. On January 8th, Stillwater’s Dave Hackett presented to the Environment Committee on the performance of California’s LCFS. We think our presentation helped inform legislators and stakeholders.

We are always on the look-out for international policies that affect our clients. One of those that we’ve been reporting on for some time is the International Maritime Organization’s Global Maximum Sulfur Content of Marine Fuel Rule (IMO 2020). This rule will impact all stakeholders in the marine fuel supply chain. We will keep a keen eye on IMO 2020’s influence on bunker fuel supplies, prices, as well as compliance strategies and enforcement.

While federal transportation fuels policies are stymied by the current political climate, the trend in U.S. state and international transportation fuels policies is to reduced greenhouse gas (GHG) emissions. Stillwater is tracking these policies as they are enacted. We are excited to aid in the development of good policy and look forward to helping our clients navigate the changes.

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