Trump IA E15

President Donald Trump speaks at Southwest Iowa Renewable Energy, an ethanol plant near Council Bluffs, on June 11. He talked about delivering on his promise to open up sales year-round of E15 fuel and said "the farmers are my best friend."

President Donald Trump, seeking to tamp down political fallout in U.S. farm states essential to his re-election, has ordered federal agencies to shift course on relieving some oil refineries of requirements to use biofuel such as corn-based ethanol.

Trump and top cabinet leaders decided late Aug. 22 they wouldn’t make changes to just-issued waivers that allow small refineries to ignore the mandates, but agreed to start boosting biofuel-blending quotas to make up for expected exemptions beginning in 2021. The outcome was described by four people familiar with the matter who asked not to be named before a formal announcement could be made.

The decision was reached after a flurry of White House meetings this week on the issue, which divides two of Trump’s top political constituencies: rural Americans and the oil industry. With the move, Trump is largely siding with farmers, ethanol producers and political leaders in Iowa that have accused the president of turning his back on the industry.

But the administration’s shift risks blowback in Pennsylvania and other battleground states, where blue-collar refinery workers have held rallies to push for relief from U.S. biofuel quotas they say are too expensive. The largest coalition of U.S. building trades unions on Aug. 22 warned Trump that changing course on exemptions would betray the president’s “campaign promise to protect every manufacturing job.”

Administration officials agreed to the broad contours of a renewable fuel plan, including further moves to encourage the use of E15 gasoline containing 15% ethanol, beyond the 10% variety common across the U.S. E15 could be dispensed alongside conventional ethanol blends at filling stations, under the drafted changes.

“President Trump is committed to ensuring our country not only continues to be the agricultural envy of the world, but also remains energy independent and secure,” White House spokesman Judd Deere said.

Under the tentative plan, the Environmental Protection Agency also will give a 500-million-gallon boost to the amount of conventional renewable fuel, such as ethanol, that must be used in 2020. A separate quota for biodiesel, typically made from soybeans, would get a 250 million gallon increase.

Additionally, the administration will enhance a program meant to expand U.S. fueling infrastructure and get more ethanol into the system. The EPA will adopt an Agriculture Department assessment of the greenhouse gas emissions associated with renewable fuel, and will expand environmental credits encouraging automakers to produce “flex-fuel” vehicles that can run on high-ethanol gasoline.

The EPA has drawn intense criticism for its Aug. 9 decision to exempt 31 refineries from 2018 biofuel-blending requirements. Although federal law authorizes the waivers for small refineries facing an economic hardship, the number of those exemptions has surged during the Trump administration, and biofuel producers say they are being handed out too freely.

However, EPA officials and oil industry leaders say the waivers haven’t harmed domestic ethanol demand and blame a glut of the product for suppressing prices. Trump’s trade war with China has exacerbated the industry’s economic challenges. As with U.S.-grown agricultural products, including soybeans, ethanol faces retaliatory tariffs in China.

Against the backdrop of tariffs, the exemptions delivered another blow to the U.S. Midwest, where guaranteed domestic ethanol demand helps provide a floor of support for corn farmers and buttresses swings in commodity prices. Ethanol refining accounts for about 40% of U.S. corn consumption.

American “agriculture has a problem if ethanol doesn’t do well,” Green Plains Inc. chief executive officer Todd Becker said in a telephone interview Aug. 22. Becker said he “can’t fault” Trump for getting tough on China, but the combination of the trade war and small refinery exemptions was causing too much pain.

“You don’t fight China and then give out SREs,” Becker said. “Farmers are furious now.”

Agriculture Secretary Sonny Perdue had urged the White House to rescind some of the recently issued waivers — at least those for refineries tied to “big” oil companies — according to an Aug. 20 memo obtained by Bloomberg.

EPA officials successfully argued that would be illegal.

Instead, Trump directed the agency to increase biofuel quotas to make up for the exemptions, a so-called “reallocation” that will effectively boost the burden for larger refineries that are not eligible to win waivers. The EPA will start incorporating expected exemptions into annual biofuel quotas beginning with 2021.

The EPA typically sets each year’s biofuel blending requirements by Nov. 30 of the preceding year, except for biodiesel quotas, which are set two years in advance. Under the U.S. Renewable Fuel Standard program, there’s a specific mandate for biodiesel, but the soybean-based product can also be used to satisfy an implied 15 billion gallon quota for conventional renewable fuel.

Although the tentative plan was meant to assuage biofuel allies, it’s not clear it was having the intended effect Aug. 23, amid industry skepticism the EPA will follow through on the agreement. Iowa officials are preparing to visit Washington for a formal rollout of the policy changes.

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