Oil and Corn clash over secretive U.S. biofuel waivers in hearing

Source: By Richard Valdmanis, Reuters • Posted: Tuesday, October 29, 2019

(Reuters) – The U.S. oil and corn industries continued a long-running public battle over America’s biofuels policy on Tuesday during a Congressional hearing about the Trump administration’s use of “secret waivers” for refineries.

Representatives of the biofuels sector accused the administration of “rampant abuse” of the so-called Small Refinery Exemptions (SRE) freeing refineries from their annual ethanol blending obligations, while the nation’s top refining association argued the program was critical to national security by keeping petroleum fuel producers in business.

But the two sides agreed on one thing: the administration’s recent proposal to remedy the small refinery waiver issue by forcing some bigger refineries to make up for the exempted volumes was a disappointment.

Geoff Cooper, the head of the Renewable Fuel Association, called it a “bait and switch” that did not go far enough to “bring idled (biofuel) plants back online.”

Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, called it “unfair” to parts of the refining industry that would have to blend more biofuels with petroleum-based fuels.

The hearing, set by the House Committee on Energy and Commerce, aired out the grievances of two key political constituencies heading into next year’s election at a time President Donald Trump has been working hard to win them over.

The U.S. Renewable Fuel Standard (RFS) requires the refining industry to use 15 billion gallons of ethanol every year to replace or reduce the quantity of petroleum-based transportation fuel, heating oil or jet fuel. But small individual facilities can secure exemptions if they prove compliance would cause them disproportionate economic harm.

Trump’s Environmental Protection Agency (EPA) has vastly expanded its use of the waivers, which are issued confidentially, triggering a backlash among representatives of the corn industry who claim the exemptions are lucrative handouts to Big Oil and hurt farmers by cutting ethanol blending volumes.

After picking up on the corn industry’s anger, Trump promised a “giant package” to remedy the issue. Early this month, the EPA unveiled the plan, which would increase the amount of ethanol some oil refineries must blend next year to make up for volumes it has waived.

Biofuels companies have instead reacted angrily – saying the proposal failed to make up for the impact of the waiver program so far and fell short of the administration’s promises. The industry had expected the EPA to calculate the increased volumes by using the three-year average of volumes waived under the SRE program, but it instead said it would use the three-year average of volumes that the Department of Energy had recommended that the EPA waive – a lower number.

“It falls woefully short of the president’s advance billing,” Gene Gebolys, chief executive of the biofuels producer World Energy, told the hearing.

The oil industry, meanwhile, also dislikes the proposal. Refiners see ethanol as competition for petroleum-based fuels and argue the EPA’s new proposal unfairly forces big refineries to bear the burdens of their smaller competitors.

The refining industry also refutes accusations that the waivers have impacted overall demand for ethanol, arguing that the U.S. trade war with China has been a much bigger factor behind falling agricultural commodity markets.

Writing by Richard Valdmanis; Editing by Marguerita Choy