President Trump Expected to Issue Executive Order Shifting RFS Compliance Obligation Downstream

NATSO has learned that President Trump is likely to issue an Executive Order as early as today directing the Environmental Protection Agency (EPA) to shift compliance requirements under the Renewable Fuel Standard (RFS) downstream from the refinery to the terminal rack.

Under this significant policy shift, the new "obligated parties" under the RFS would be fuel retailers and wholesalers that purchase product in bulk "above the rack" and assume a motor fuel excise tax liability. These entities would be required to acquire RINs (tradable credits used to demonstrate compliance with the RFS's renewable fuel volume obligations).

NATSO has advocated against this shift, arguing that the current approach has worked effectively and that changing the so-called "point of obligation" in this manner would raise fuel prices, eliminate fuel retailers' options and flexibility, and result in a massive burden-shift to the retail industry from the refining industry.

"This backroom deal would severely undermine the Renewable Fuel Standard and force everyday Americans to shoulder the burdens of higher fuel costs and more expensive goods," said Lisa Mullings, NATSO's CEO, in a statement released with SIGMA. "A majority of the fuel industry, including most refiners and large sectors of transport as well as renewable fuel producers, are united to keep the compliance requirements where they are today. Making this change would only benefit a handful of companies at the expense of average, hardworking Americans."

Under the RFS today, refiners and importers are required to ensure that renewable fuels are integrated into the nation's fuel supply. Recently, however, there has been a coordinated effort on the part of merchant refiners such as Valero to shift compliance responsibility under the RFS from refiners and importers to so-called "rack sellers." The EPA late in 2016 proposed to reject this approach; NATSO filed comments last week agreeing with EPA's rejection and urging EPA to make the rejection final. Trump's Executive Order will direct EPA to reach the opposite conclusion.

At this early stage, it is uncertain what the timeline will be for this policy shift to take effect.

Historically when significant new rules like this are drafted and implemented, EPA drafts a proposed rule, takes public comment on that rule, issues a final rule, and then allows for a prolonged "grace period" before the rule takes effect. (This was the approach for CAFE standards for cars and trucks, for example, as well as new sulfur content requirements for gasoline and diesel fuel.)

It generally takes 9-15 months before an Agency can issue a final rule of this magnitude, and at least that much additional time in a "grace period" before it takes effect. One would think that this current issue mandates an especially long grace period for balance sheets to wind down and adjust.

That being said, some market participants are behaving as though the new rules will take effect on a much faster timeline.

Obviously much uncertainty remains -- NATSO will continue to vigilantly advocate for the truckstop industry's interests on this and all other issues, and will continue to keep its members apprised of all additional developments.

David Fialkov's photo

David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov directs NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More
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