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 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.
“Corn farmers weren’t shy in telling the president that the impact of these waivers would lead to significant consequences for farmers, folks working at ethanol and biodiesel plants, and the countless other rural jobs that depend on this market,” said Kevin Ross, president of the National Corn Growers Association.
Though federal law authorizes the EPA to exempt small refineries facing economic hardship, the Trump administration has granted more waivers, following court rebukes of past agency denials. The exemptions — including a batch of 31 in August — angered farmers and biofuel producers, who say they hurt demand, on top of a broader trade dispute with China that has led to retaliatory tariffs on U.S. agricultural products. Ethanol consumption accounts for some 39% of U.S. corn production.
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. 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.
Much of the plan must still be adopted through a formal rulemaking process. The EPA was set to propose major elements of the package 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.
“I’ll continue to hold EPA’s feet to the fire so they do as President Trump committed,” Senator Chuck Grassley, a Republican from Iowa, told reporters Oct. 4. Now that the plan is on paper, “the only thing that I could see that would interfere with it would be some court case.”