Wednesday, September 25, 2013

Grassley Presses EPA to Increase Transparency and Address Reports that RIN Market is Being Exploited by Wall Street

WASHINGTON - Senator Chuck Grassley of Iowa is pressing the Environmental Protection Agency (EPA) to increase the transparency of the Renewable Identification Number (RIN) market and provide assurances that the market is functioning for its intended purpose, rather than acting as a profit mechanism for Wall Street banks and other financial institutions.

In a letter to EPA Administrator Gina McCarthy, Grassley wrote, "I'm concerned about recent reports of manipulation or exploitation of the RIN market by non-obligated parties, including financial institutions.  Allegations that the opaqueness of this market is leading to abuse and exploitation by individuals or firms simply to generate profits at the expense of refiners, other obligated parties, and perhaps consumers is troubling."

A copy of the text of Grassley's letter to McCarthy is below.  A signed copy can be found here.

September 25, 2013

The Honorable Gina McCarthy

Administrator

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue NW

Washington, DC 20460

Dear Administrator McCarthy:

I've been a strong supporter of domestically produced biofuels for many years.  The production of homegrown biofuels allows American consumers to use a product that is renewable, cleaner and domestically produced.  The Renewable Fuel Standard has been a great success in achieving higher use of biofuels in our transportation fuel supply.

The Renewable Fuel Standard includes a RIN credit trading system. The RIN credit market was created as part of the Renewable Fuel Standard to provide flexibility and aid obligated parties in complying with their annual renewable volume obligations (RVO's).

I'm concerned about recent reports of manipulation or exploitation of the RIN market by non-obligated parties, including financial institutions.  Allegations that the opaqueness of this market is leading to abuse and exploitation by individuals or firms simply to generate profits at the expense of refiners, other obligated parties, and perhaps consumers is troubling.  The EPA needs to provide assurances that this market is functioning for its intended purpose, rather than acting as a profit mechanism for Wall Street banks and other financial institutions.  For that reason, I'd like the EPA to respond to the following questions.

1.      Other trading markets are regulated to protect market participants against fraud, manipulation and abusive trading practices.  What safeguards does EPA have in place to protect against RIN market manipulation and abuses by non-obligated third parties who are not directly involved in the renewable fuel supply chain?

2.      Please describe the oversight network EPA has in place to ensure that the RIN credit market is not manipulated by obligated parties or non-obligated parties.

3.      Is EPA working to modify the RIN credit market to eliminate manipulation and abusive trading practices like hoarding?  Has EPA considered implementing the type of volatility controls that are present in other markets, such as limits on daily price movements, position limits, etc.?

4.       Is there a way for the general public and all parties who generate, own or trade RINs to discover the market price for RINS through the EPA's EMTS system?  How do the prices reported by third-party industry publications compare to prices reported to the EMTS system?

5.      Why doesn't EPA publicly disclose information that would enhance the transparency of the RIN market?  Has EPA considered providing aggregated data to the public regarding RIN transaction prices, volumes traded, and volumes held by the various segments of the marketplace (i.e., obligated refiners, obligated importers, non-obligated blenders/marketers, and non-obligated third parties with no tie to the supply chain)?

6.      Is it possible for consumers or obligated parties to determine the amount of separated RINs in the market at a given time?  Is it possible at any given time to determine from publicly available data who holds those separated RINs?

7.      To what degree are non-obligated parties with no direct involvement in the fuel supply chain (e.g., financial institutions, speculative investors, etc.) participating in the RIN market?  What percentage of separated RINs are being held by non-obligated parties with no tie to the fuel supply chain?  What percentage are being held by non-obligated blenders, marketers and retailers?

8.      Is the current opaque RIN credit market the best way to achieve a fair, orderly and efficient market that protects market participants and is free of manipulation?

9.      Has EPA considered installing external oversight over the RIN credit market?

It's troubling that there appears to be no way to determine who is trading the credits, at what price, and at what volumes.  It's even more alarming that it's impossible to know the extent of the involvement of financial or other speculators.  It's imperative, to maintain confidence that the pricing of RINs is based on market forces and not manipulation or excessive speculation, that EPA increase the transparency of the market.  By answering these questions, EPA may be able to provide the necessary transparency.

Thank you for your consideration and I look forward to your prompt reply.

Sincerely,

Charles E. Grassley

United States Senator

WASHINGTON - Sen. Chuck Grassley of Iowa today received the 2013 Fueling Growth Award from Growth Energy for his work to develop clean-burning, domestically produced ethanol.  The award acknowledges that Grassley's "hard work in Congress has made a significant contribution to the viability of the biofuels industry," according to Growth Energy.

"I'm honored to receive this award today," Grassley said.  "I've long been a supporter of renewable fuels, starting with ethanol.  Alternative energy sources reduce our dependence on foreign oil, increase national security, and create jobs for American workers in addition to extending our fuel supply and lowering prices at the pump."

The award is given annually by Growth Energy to members of Congress who support ethanol advancement and work to craft consistent and fair federal policy for the industry.

Grassley has worked for many years to promote favorable federal policies in order to establish renewable fuels as a strong alternative to finite fossil fuels.  Grassley vigorously advocates for the maintenance of the Renewable Fuel Standard.  In August 2013, Grassley, along with Sen. Amy Klobuchar, urged the Federal Trade Commission to investigate possible anti-competitive practices by oil companies that may be limiting the competitiveness of renewable fuels.

Nationally, the U.S. Department of Energy estimates that for every one billion gallons of ethanol produced, 10,000 jobs to 20,000 jobs are added to the economy.  In 2011, more than 400,000 jobs were created and supported by the ethanol industry and production of ethanol contributed $42.4 billion to the national Gross Domestic Product, according to the Energy Department.

The Iowa Renewable Fuels Association reported that with 41 ethanol plants and 3.7 billion gallons produced in 2012, Iowa is the largest producer of ethanol in the country.  According to the Iowa Corn Growers Association, Iowa's ethanol industry supports 55,000 jobs and accounts for $5.4 billion of the state's total economy.

Comprising many American ethanol producers and other organizations within the industry, Growth Energy represents producers and promotes ethanol production to "fuel America in ways that achieve energy independence, improve economic well-being and create a healthier environment for all Americans today."

Grassley will receive the award this evening at the Growth Energy Advocacy Conference congressional reception.

The letters Ranking Member Grassley inserted into the hearing record are attached.

Prepared Statement of Chuck Grassley of Iowa

Ranking Member, Senate Judiciary Committee

Hearing on "Conflicts between State and Federal Marijuana Laws"

Tuesday, September 10, 2013

Mr. Chairman, thank you for holding today's hearing on the conflict between federal and state laws on marijuana.

Since Congress passed the Controlled Substances Act, the cultivation, trafficking, sale and use of marijuana have been illegal under federal law.  Marijuana's continued presence on this statute's list of illegal substances isn't based on a whim.  It's based on what science tells us about this dangerous and addictive drug.  There's a process that exists to move drugs on and off that list.  But the scientific standard to do that hasn't yet been met for marijuana.

Marijuana isn't only illegal under laws passed by Congress.  It is illegal under international law as well.  The United States and over 180 nations have signed the Single Convention on Narcotic Drugs.  This treaty requires the United States to limit the distribution and use of certain drugs, including marijuana, for exclusively scientific and medical use.  It's something this country gave its word to do.  And it's a commitment that our country and many others have benefitted from through improved public health.

Yet in 2012, Colorado and Washington decided to be the first jurisdictions in the world to legalize the cultivation, trafficking, sale and recreational use of marijuana.

These laws flatly contradict federal law.  Moreover, these laws have nothing to do with the controversy about whether marijuana has an appropriate medical use.  Some experts fear they will create a Big Marijuana industry, including a "Starbucks of marijuana," that will damage public health.  And it seems unlikely that we'll be able to confine that industry's effects to adults, and those within Colorado and Washington.

And the response of the Department of Justice isn't to sue to strike down the laws, or to prosecute illegal drug traffickers, but just to let these states do it.

These policies do not seem to be compatible with the responsibility Justice Department officials have to faithfully discharge their duties.  And they may be a violation of our treaty obligations.  Prosecutorial discretion is one thing.  But giving the green light to an entire industry predicated on breaking federal law is another.

These policies are another example of the Administration ignoring laws that it views as inconvenient, or that it just doesn't like.  Immigration law, Obamacare deadlines -- the list is long, and it hardly needs repeating.

But what's really striking in this case is that this Department of Justice is so quick to challenge state laws when it doesn't like or want to enforce them.  States that change their voting laws to require an ID?  See you in court.  States that try to secure their borders when the federal government won't?  Expect a lawsuit.  But if some folks want to start an industry dedicated to breaking federal law?  Well, then the Department's position is to wait and see how it all works out.

But we already have a good idea how it will work out, and the answer is badly.  Take Colorado as an example.  Since it legalized and attempted to regulate medical marijuana, what have they seen?  From 2006 to 2011, a 114 percent increase in driving fatalities involving drivers testing positive for marijuana.  Comparing 2007 through 2009 with 2010 through 2012, a 37 percent increase in drug-related suspensions and expulsions from Colorado schools.  A sharp increase in marijuana exposures to young children, many resulting in trips to poison control centers or hospitals.  And in the words of Colorado's Attorney General, the state is becoming "a significant exporter of marijuana to the rest of the country."

The statistics on this point are shocking, but not surprising, given simple economics.  From 2005 to 2012, there was a 407 percent increase in Colorado marijuana interdiction seizures that were destined for other states.  In 2012 alone, there were interdictions in Colorado bound for 37 different states.

One of those states was my home state of Iowa.  In 2010, Colorado was the source state for 10 percent of all marijuana interdicted in Iowa.  That number grew to 25 percent in 2011, and to 36 percent in 2012.  This is all before full legalization in Colorado.  What do you think this number will be next year?  Is the federal government prepared to pay for the law enforcement costs it is imposing on states like Iowa because it refuses to enforce federal law?

In 2012, the proportion of Iowa juveniles entering substance treatment primarily due to marijuana reached its highest point in 20 years.  How many more of Iowa's daughters and sons will go into treatment next year because the Department won't enforce federal law?  There is no amount of money that can make Iowa whole for that.

I have a letter from the Director of the Iowa Office of Drug Control Policy to the Attorney General that lays out some of these statistics.  The Director requests that the Department reconsider this decision.  I ask that it be included in the record.

Of course, the Department would have known many of these things had it consulted with the folks on the ground before making these decisions.  These are people who see the effects of marijuana addiction and abuse every day.  I also have here a letter to the Attorney General from many of the major state and local law enforcement organizations in the United States.  I ask that it be entered into the record.

I understand representatives of many of these organizations had asked to be consulted in advance of the Department's decision.  And they were told that they would be.

However, they wrote, "it is unacceptable that the Department of Justice did not consult our organizations - whose members will be directly impacted - for meaningful input ahead of this important decision.  Our organizations were given notice just thirty minutes before the official announcement was made public and were not given the adequate forum ahead of time to express our concerns with the Department's conclusion on this matter.  Simply 'checking the box' by alerting law enforcement officials right before a decision is announced is not enough and certainly does not show an understanding of the value the Federal, state, local and tribal law enforcement partnerships bring to the Department of Justice and the public safety discussion."

I agree.  The way these law enforcement professionals were treated is quite disturbing.

I also have a letter from all nine of the former heads of the Drug Enforcement Administration that was sent to the Attorney General yesterday.  I ask that it be placed in the record as well.  These former Administrators were appointed by presidents of both parties.  They described themselves as "shocked and dismayed" by the Department's decision.  They had also offered to meet with the Attorney General about these issues.  But, as they wrote, they "heard nothing" until the Department's announcement that wouldn't challenge these laws. These former officials offer a wealth of knowledge about the law enforcement and public health implications of these decisions.  Their treatment by the Department is simply inexplicable.

I am nonetheless grateful that the Deputy Attorney General is here today to explain the Department's decisions.  I am hopeful this hearing will be the first step toward reconsidering these misguided policies.  Thank you.

In a letter to Department of Agriculture Secretary Tom Vilsack, the senators wrote, "While we are thankful the emergency release of CRP acres was approved, farmers were left with essentially only two days to cut, dry, and bale hay to meet the deadline for the program.  That unreasonably short timeframe prevented many farmers from baling any hay under the emergency CRP release.  Therefore, these producers did not get the benefit from CRP access that should have helped mitigate the short supply of hay for the upcoming winter."

Grassley and Harkin added their support for the Conservation Reserve Program, and said it helps to safeguard some of the most environmentally sensitive land, but the unusually dry weather led them to request the extension, especially in light of the short timeframe provided by the Agriculture Department.

Here is a copy of the text of the letter to Vilsack.

September 5, 2013

The Honorable Tom Vilsack

Secretary
U.S. Department of Agriculture
1400 Independence Ave., SW
Washington, D.C. 20250

Dear Secretary Vilsack:

Over the past few days a good number of Iowa farmers have contacted us concerning the hot dry weather Iowa has been experiencing, how those conditions have been tough on Iowa livestock and forage crops, and their need for access to Conservation Reserve Program (CRP) for haying and grazing.  As the former governor of Iowa, you certainly understand the importance of livestock production to our state and share our concern for Iowa livestock producers as they deal with a second year of drought conditions that have severely strained forage supplies.

The most recent U.S. Drought Monitor indicates that large portions of Iowa are classified as either D2, Severe drought, or D1, Moderate drought.  Cattle producers tell us they are having difficulty finding an adequate supply of hay, and many of their pastures are too dry to support their herds at this time.

We commend the Farm Service Agency (FSA) for opening up CRP acres in parts of Iowa for emergency haying and grazing in the late afternoon of August 29, but that was only two days before the haying deadline of August 31.  While we are thankful the emergency release of CRP acres was approved, farmers were left with essentially only two days to cut, dry, and bale hay to meet the deadline for the program.  That unreasonably short timeframe prevented many farmers from baling any hay under the emergency CRP release.  Therefore, these producers did not get the benefit from CRP access that should have helped mitigate the short supply of hay for the upcoming winter.  CRP is a crucial program that helps safeguard some of our most environmentally sensitive land.  It's also key nesting habitat for a variety of bird species.  So it's not without careful consideration of many factors that we request you consider extending emergency haying on CRP acres in Iowa.

We appreciate your consideration of our request.  If you have any questions, please feel free to contact us or our staff.

Sincerely,

Charles E. Grassley

Tom Harkin