August 2013 • 29
Also of note, the one million barrels stored in the
Northeast Home Heating Oil Reserve was replaced
with an ultra-low sulfur product in mid-2012
*Legislation was approved in Connecticut on
June 4, 2013 that changed the original ULSHO
deadline from July 1, 2014 to July 1, 2018.
BIOFUELS
Biodiesel Tax Credit –
The $1 per
gallon tax credit for blenders of biodiesel
and renewable diesel fuel was retroactively
extended through 2013 as part of the “tax
extenders” package included in the “fiscal
cliff” deal in January. It was also expanded
to include biofuel derived from algae. Sen.
Chuck Grassley (R-IA), a lead champion of
the credit, has acknowledged that, like the
ethanol credit before it, the biodiesel credit
is likely to be phased-out at some point, pos-
sibly as part of a deficit reduction deal, as a
result of an agreement on comprehensive tax
reform or as a means to pay for some other
piece of legislation. Until this happens, it is
likely that the biodiesel tax credit will simply
be extended on a year-to-year basis.
Renewable Fuel Standard (RFS)
Reform –
Some in Congress have called
for repeal or modification of the Renewable
Fuels Standard (RFS), a 2005 law requiring
a minimum volume of renewable fuel (i.e.,
biofuels) be blended into transportation
fuel. In 2007 it was expanded to include
diesel fuel (with blending credits eligible
for blending with heating oil) and the total
blending mandate was increased from 9
billion gallons (2008) to 36 billion gallons
(by 2022).
Groups like API and the refiners’
association oppose RFS. Food processors
and retailers have argued that it drives up
food costs. Motor fuel groups are concerned
about the push for 15 percent ethanol
blends (E15) as the blend-wall approaches.
Other groups that represent the biofuels
industry, such as National Biodiesel Board
and Growth Energy, support “fixing”
RFS by just addressing key issues and by
implementing measures to address recent
cases of RINs fraud. NEFI is monitoring
developments closely as major changes to
– or repeal of – the RFS program could have
major consequences for biodiesel supply.
Proposed Biodiesel PTD Content
Disclosure –
Heating oil dealers who pick
up blended distillates at the terminal have no
way of knowing the exact biodiesel content
because product transfer documents (PTDs)
are not required to list biodiesel content for
B-5 blends and below. With the increase in
state biodiesel mandates, biodiesel content
information is essential for compliance
and proper performance, especially in cold
weather areas. The EPA has proposed a rule
that would require full disclosure of biod-
iesel content on all PTDS. NEFI submitted
written comments supporting the biodiesel
content disclosure provision.
HEDGING & COMMODITY TRADING REFORM
Dodd-Frank Implementation –
NEFI
continues to monitor the implementation
of commodity derivatives (i.e., futures &
swaps) market reforms as required under the
Dodd-FrankWall Street Reform&Consumer
Protection Act of 2010. As necessary, NEFI
has submitted comments on proposed rules
and/or has met personally with regulators to
discuss industry concerns.
The Commodity Futures Trading
Commission (CFTC) has completed 75
percent of its rulemakings and aims to finish
by the end of the year. NEFI believes full
implementation and vigorous enforcement
of new and existing rules – all the while pro-
tecting the interest of
bona fide
hedgers and
preserving necessary market liquidity – will
lead to more stable and transparent markets
that are free of fraud and manipulation.
Funding for Derivatives Oversight
–
CFTC funding is seen by opponents of
Dodd-Frank as a way to stall derivative
market reforms. In recent years, NEFI and
its allies have defeated every proposed cut,
but the CFTC remains notoriously under-
funded. Despite having been tasked with
oversight of more than $1 trillion in daily
trading activity, the CFTC has only seen a
20 percent increase in its budget since 2009.
Staffing levels are at 690, little more than its
peak in the 1990. The agency is also subject
to automatic spending cuts (sequestration),
which CFTC Chairman Gensler has argued
has harmed the agency’s ability to identify
and prosecute manipulation, fraud and
other criminal acts.
To make matters worse, the new House
spending bill would cut the CFTC budget
by $12 million, or 6 percent. NEFI is cir-
culating a coalition letter opposing this cut
and urging full funding at the $315 million
level necessary to fully implement and
enforce new and existing trading rules.
Speculation Limits –
One of the most
important reforms that NEFI secured as
part of the 2010 Wall Street Reform law
was a requirement that the CFTC establish
limits on all speculative positions in the
commodity futures and swaps markets.
The CFTC finalized a position limits rule
on Oct. 18, 2011. The rule was success-
fully challenged in court by Wall Street
groups; it was vacated by a District Court
judge on Sept. 28, 2012 (just two weeks
before the rule was to take effect) citing an
“ambiguous” mandate from Congress and
the lack of a “finding of necessity” by the
CFTC. The CFTC is currently appealing
the decision.
NEFI and over 40 coalition allies filed a
compelling amicus curiae brief in support
of position limits on April 22, 2013. We
await a hearing date from the appeals court.
Meanwhile, we have learned that the CFTC
may revise its position limits rule in the
coming months. We are communicating
with the CFTC and monitoring develop-
ments closely.
Hedger Protections –
When commodity
futures broker MF Global went bankrupt in
October of 2011, many of its clients including
several NEFI members were affected. Many
saw the cash in their accounts frozen and
their hedging positions put in jeopardy.
NEFI has been communicating with regula-
tors and lawmakers on ways to enhance
hedger protections. Already, the CFTC,
exchanges and self-regulatory organizations
such as the National Futures Association
Government Regulation
Continued …
