By Jarrett Renshaw
NEW YORK (Reuters) - U.S. Senator Ted Cruz wants to place a cap of 10 cents each on renewable fuel credits - a fraction of their current value - to help U.S. refiners cope with the nation's biofuels policy, according to a document viewed by Reuters on Thursday.
The proposal marks the latest step in talks being mediated by the White House between oil industry backers and rivals in the ethanol industry over the Renewable Fuels Standard. Refiners claim complying with the law, known a the RFS, costs hundreds of millions of dollars a year and could put them out of business.
Introduced more than a decade ago to help farmers, cut oil imports and reduce emissions, the RFS requires refiners to blend increasing amounts of biofuels into the U.S. fuel supply every year, or purchase credits called RINs from other companies that do the blending instead.
Congress members from corn states this week had asked Cruz, a Texas Republican, and other lawmakers allied with the refining industry to offer specific proposals that could lower credit costs without injuring the RFS, a program defended fiercely by Midwestern states like Iowa and Nebraska.
Cruz's proposals call for the U.S. Environmental Protection Agency, which administers the RFS, to sell "fixed price waiver credits" at 10 cents each that would satisfy all categories under the Renewable Fuel Standard.
The senator also proposed forming a working group of administration officials, lawmakers and stakeholders to devise a longer-term solution. The proposals were circulated to administration officials.
Prices of renewable fuel (D6) credits were trading at roughly 70 cents on Friday, down from 74 cents earlier this week to the lowest level since early October. The credits had been trading at 90 cents each at the end of November.
Officials in the offices of Cruz and the White House did not immediately respond to requests for comment about the proposal. Officials for Iowa Senators Chuck Grassley and Joni Ernst declined to comment, saying Cruz's office had not yet contacted them about the proposals.
The ethanol industry has said in the past that placing caps on the credits was a non-starter, and has instead argued for policies to increase volumes of ethanol in the U.S gasoline supply. They claim this would boost supplies of the credits, lowering their prices.
"Ted Cruz and his backers don’t seem to be taking the White House seriously. President Trump vowed to protect rural America," Brooke Coleman, the Executive Director of Advanced Biofuels Business Council, said in release on Friday accompanying a letter signed by 85 supporters of the biofuels industry urging the White House to protect the program.
The RFS was introduced by President George W. Bush. It has fostered a market for ethanol amounting to 15 billion gallons a year.
Refiners like Philadelphia Energy Solutions and Monroe Energy, both of Pennsylvania, along with Texas giant Valero Energy Corp (NYSE:VLO), lack adequate facilities to blend biofuels into their products. Valero put its cost of complying with the RFS at around $750 million last year.