After Farm Belt Outcry, Trump Administration Revamps Ethanol Rules

Source: By Kirk Maltais and Jacob Bunge, Wall Street Journal • Posted: Sunday, October 6, 2019

Producers of the corn-based fuel say they’ll wait to see whether changes push up demand

An ethanol plant in Mead, Neb. Photo: humeyra pamuk/Reuters

Farmers and ethanol producers including Green Plains Inc., GPRE 0.46% Archer Daniels Midland Co. ADM 2.07% and Poet PTBBU -24.55% LLC applauded the plan, which followed months of intensifying criticism in farm states.

“It’s a big tailwind for the [ethanol] industry and the U.S. farmer,” said Todd Becker, chief executive of Green Plains, one of the biggest U.S. ethanol makers.

But ethanol producers that halted or lowered ethanol output in recent months, blaming blending exemptions for weighing on prices, said they didn’t plan to ramp back up immediately.

“It is too early to judge the impact of this announcement,” said Eric Wilkey, president of Arizona Grain Inc., a sister company to Pinal Energy LLC. Pinal idled its 50-million-gallon-per-year plant in Maricopa, Ariz. in February.

Corn futures on the Chicago Board of Trade dropped following the plan’s release, with the December corn contract slipping 1%. Traders said they were dissatisfied with the scant details in the EPA’s press release. Ethanol futures also declined, with the November contract down 2.2% at $1.39 a gallon.

“I think there was a lot of nice-sounding words, and not a lot else,” said Brian Grossman, an agricultural trader with Chicago-based Lakefront Futures & Options LLC.

Oil refiners, which are obligated to blend ethanol into gasoline under U.S. law, pledged legal challenges to the plan. They called it a political play for Midwestern votes that will add financial burdens on the U.S. energy industry and distort fuel markets.

“The president has broken his promise to the manufacturing workers he promised to protect in Pennsylvania, Ohio, Texas and across the nation,” said the Fueling American Jobs Coalition, a group representing refiners, unions and gasoline retailers.

Some refiners say the ethanol-blending requirements add costs and regulatory burdens.

The EPA said it will propose expanded biofuel requirements starting in 2020, aimed at ensuring more than 15 billion gallons of ethanol is blended into the nation’s fuel supply. The agency plans to maintain that level—which is the current standard—even while granting exemptions to small refineries seeking temporary relief from the requirements. The Agriculture Department will evaluate new infrastructure projects that would allow higher-level biofuel blends.

Ethanol-blending exemptions are at the center of a battle between the ethanol and oil-refining industries. Ethanol producers, including Poet, have said those exemptions cut ethanol demand, eroded their profitability and forced the closure of plants. Fuel groups have said the exemptions don’t impact overall ethanol sales or prices.

The lack of specifics around how the EPA will ensure the blending of 15 billion gallons of ethanol into the fuel supply is keeping grains traders skeptical about how much this plan will increase corn consumption.

“This is just like the trade war, they’ll believe it when it happens,” said Sal Gilbertie, president of Teucrium Trading LLC.

Ethanol production has been declining since August, after the EPA granted 31 waivers to small gasoline refineries allowing them to forgo mixing ethanol into their fuel as required. From the beginning of August into mid-September, U.S. daily ethanol production fell by roughly 100,000 barrels to 943,000 barrels, the lowest rate of production since April 2016. It has since rebounded to 958,000 barrels a day this week.

Eamonn Byrne, CEO of ethanol producer Plymouth Energy, praised the plan but said his company doesn’t immediately plan to restart its Merrill, Iowa, plant, idled in July.

“We have to let the market digest this information and make a decision then,” Mr. Byrne said.

Write to Kirk Maltais at and Jacob Bunge at