e-15 pump

The Trump administration is taking action to boost U.S. demand for corn-based ethanol and soybean-based biodiesel, as the president seeks to temper criticism from farmers and Midwest politicians before next year’s election.

The U.S. Environmental Protection Agency and Department of Agriculture on Oct. 4 outlined several steps to aid those renewable fuels, committing to boost annual biofuel-blending quotas to make up for waivers exempting some small refineries from the mandates.

The shift, which still must be formally proposed and codified, would effectively force bigger, non-exempted refineries to take up the slack.

The agencies praised President Donald Trump, saying he brokered the deal on U.S. biofuel policy, terrain that divides two of his key political constituencies: agriculture and the oil industry.

“President Trump has once again demonstrated that he is a champion for our nation’s farmers and rural America,” Agriculture Secretary Sonny Perdue said in an emailed statement.

Perdue said the agreement makes improvements to the U.S. biofuel mandate “that will better harness the production of our farmers and ensure America remains energy dominant.”

The actions were provoked by anger in politically important farm-belt states. Biofuel advocates accused the administration of too liberally exempting refineries from a 2005 law requiring them to mix renewable fuels into petroleum. The backlash has been especially intense in Iowa, the leading U.S. producer of both corn and the ethanol made from it.

The EPA said it would seek public comment on a plan to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020 and that statutory obligations for biodiesel also are satisfied.

“This will include accounting for relief expected to be provided for small refineries,” the EPA said in a news release.

The agency is set to effectively offset future exemptions by factoring a three-year rolling average of waived gallons into annual quotas, beginning with targets for 2020, according to people familiar with the matter who asked not to be named before a formal proposal is released.

The package does not include a major concession sought by oil refiners: a ceiling on the cost of tradeable compliance credits they use to prove they have satisfied blending targets under the Renewable Fuel Standard law. Refiners and oil-state senators had argued they needed an insurance policy against spiking prices for those credits, known as Renewable Identification Numbers.

Labor unions and oil industry allies also had lobbied the White House to back off from any deal that would boost biofuel quotas, arguing it could undermine the economics of some refineries and put Rust Belt jobs at risk.

The EPA and Agriculture Department pledged to “continue to evaluate options” for reforming and boosting transparency in the RINs market, amid continued allegations of speculation and credit hoarding. A previous review ordered by Trump did not result in major changes.

The administration’s plan includes several measures to stoke U.S. demand for ethanol, with the Agriculture Department committing to seek funding for infrastructure projects that would get higher-biofuel blends to consumers.

And the EPA pledged to take steps to accelerate filling station adoption of E15 gasoline that contains 15% ethanol, building on its approval of year-round sales of the fuel earlier this year. That includes streamlining labeling requirements that are meant to prevent motorists from dispensing E15 into automobiles not authorized to use the fuel. Ethanol producers say the warning labels scare off consumers, suppressing sales.

Ethanol advocates widely praised the move, with Growth Energy Chief Executive Emily Skor calling the administration’s pledge “a tremendous victory for rural America. With the final pact, Trump shows he heard “the voices of farmers and biofuel producers,” Skor said by email.

Senator Joni Ernst, a Republican from Iowa, said the package “will help increase demand for our biofuels” and “provide certainty for farmers and producers for years to come.”

Much of the plan must still be adopted through a formal rulemaking process. The EPA is set to propose major elements of the package as soon as next week and finalize the changes by Nov. 30, a deadline for setting annual biofuel quotas.

But oil refiners are expected to challenge the measure. Industry allies have questioned the legality of the EPA’s new quota-setting plan.

To make good on its commitments, the EPA will have to abide by federal rulemaking requirements and stay within the boundaries of the Clean Air Act, said Scott Segal, a lobbyist at Bracewell LLP who works with refiners.

“That will be a tall order and substantial litigation is likely,” Segal said, adding the administration does not have legal power to expand ethanol volumes on the basis of small refinery exemptions. And, he noted, “the president continues to be committed to addressing economic harm to the refining sector, important as it is to consumers, workers and energy security.”

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