The Fundamental Flaw in the RFSThe Misplaced Point of Obligation and the Blender Loophole
Under the Renewable Fuel Standard (RFS) program, when renewable fuel is blended with transportation fuel, the blender generates credits – called Renewable Identification Numbers (RINs) – that are needed to demonstrate compliance with the program. These credits prove to the Environmental Protection Agency (EPA) that the parties responsible for blending renewable fuel into the transportation fuel supply are following the law. That seems to make sense, right?
Well, what makes no sense at all is who the EPA designates as responsible for complying with the RFS. The EPA wrongly placed the “point of obligation” on refiners and importers, most of whom do not control the blending process, rather than making the actual blenders responsible for complying with the RFS.
By leaving the blenders exempt, the EPA has placed the obligation on the parties least able to affect renewable fuel use. This has resulted in a giant loophole – the Blender Loophole – that is discouraging the increased use of renewable fuels while creating windfall profits for the exempt blenders. This the fundamental flaw of the RFS.
Shouldn’t the companies that actually BLEND the fuel be held responsible for complying with the RFS blending obligation? The EPA’s misguided administration of the RFS wreaks havoc on merchant refiners, small refiners, importers and small fuel retailers and prevents the RFS from working as intended.
The EPA must close the Blender Loophole by making ALL BLENDERS responsible for complying with the RFS. If the blender loophole were closed, blenders would have both a legal obligation and a financial incentive to increase renewable fuel use – the same as refiners and importers – and the RFS would have a better chance of working as intended. This would benefit consumers, as well as the many companies involved in the program.