Oil industry fumes as USDA chief champions ethanol

Source: Marc Heller, E&E News reporter • Posted: Sunday, May 12, 2019

Agriculture Secretary Sonny Perdue may be a hero to corn farmers who like ethanol mandates, but the petroleum industry has a less glowing term for the former governor of Georgia: lobbyist.

Perdue, who came to office with scant background in the politics of biofuels, has emerged as a top public voice for ethanol, setting up a sometimes-awkward dynamic with the agency that actually runs the renewable fuels program, EPA, and its administrator, Andrew Wheeler.

In setting policies around biofuels, EPA is supposed to weigh the impact on petroleum as well, and Perdue’s pressure on the White House has caught the attention of both sides in the debate on the renewable fuels standard.

Ethanol advocates praise the USDA secretary’s outspoken role while the petroleum industry complains that he is overstepping his jurisdiction. They say that Perdue and his chosen deputy Agriculture secretary, former soybean lobbyist Steve Censky, promote misleading information about ethanol’s benefits.

“Secretary Perdue has been quite active in pushing a particular RFS agenda, even when doing so hurts consumers, small retailers, refiners and industrial workers,” said Scott Segal, himself a lobbyist and an advocate for the petroleum industry.

“USDA does not have a formal role when it comes to the RFS,” Segal said. “The technical expertise resides within EPA, with the Energy Department having some input. So, when USDA inserts itself, it creates the mistaken impression that the RFS is just another agricultural subsidy when it’s really a clean air program.”

Ethanol advocates say they are elated that Perdue seems to be making headway, particularly in pushing the administration to move faster toward approving higher-ethanol fuel called E15 for sale this summer.

“Secretary Perdue has been just a phenomenally effective voice and advocate for agriculture and for renewable fuels within this administration,” said Geoff Cooper, president of the Renewable Fuels Association, at a recent roundtable with reporters.

“He has been committed to doing whatever he can to ensure EPA is implementing the RFS in a way to grow the industry and to grow demand for his constituents in Agriculture,” Cooper said. “He doesn’t lack interest and passion in the issues, and I think to the extent that he is sharing his views with Administrator Wheeler that’s helpful to us.”

Energy lobbyists told E&E News that EPA officials aren’t pleased with the pressure coming from Perdue but that he isn’t the first Agriculture secretary to push the environmental agency. During the Obama administration, Agriculture Secretary Tom Vilsack — a former Iowa governor — was a strong ally for ethanol, said Brian Jennings, CEO of the American Coalition for Ethanol. But the Obama White House may have been less willing to listen to Vilsack, Jennings said. Trump has personally inserted himself into the issue by promising to boost ethanol, further fueling the debate.

Perdue, for his part, has portrayed a positive relationship with Wheeler.

They’ve appeared together to promote the reduction of food waste.

When Perdue declared in March that EPA wouldn’t be able to ensure sales of 15% ethanol fuel this summer — prompting a public correction from Wheeler’s office — USDA within hours posted a photo of the two men smiling at a meeting in Perdue’s office, seemingly pasting over any perceived tension.

“Appreciate him moving expeditiously to finalize E15 rule before the start of summer driving season,” Perdue said in a tweet accompanying the photo.

Perdue’s initiation into the ethanol fight may have come during the Commodity Classic, an annual farm trade show, in Anaheim, Calif., in February 2018. Newly confirmed as secretary, Perdue met with farmers and commodity groups and delivered the keynote address at the event, the biggest of its kind in the country.

“He was out there for several days. By the time he left, he understood,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association, among the groups meeting with Perdue. “He left informed and energized.”

Since then, Perdue has regularly said he hopes EPA will make moves to increase demand for ethanol.

When President Trump said he was directing EPA to make E15 fuel available year-round in October 2018, Perdue issued a statement: “Consumers will have more choices when they fill up at the pump, including environmentally friendly fuel with decreased emissions. It is also an excellent way to use our high corn productivity and improved yields. Year-round sale of E15 will increase demand for corn, which is obviously good for growers. This has been a years-long fight and is another victory for our farm and rural economies.”

Perdue has even adopted a term coined by the ethanol industry, “demand destruction,” to criticize the exemptions EPA grants to small refineries that claim biofuel blending requirements bring them economic hardship. EPA has granted 39 such exemptions during the Trump administration, and a similar number have petitions pending.

Petroleum industry sources object to the “demand destruction” term, saying there’s little if any evidence that small-refinery exemptions result in less demand for ethanol. They point to studies by a University of Chicago economist often friendly to ethanol, Scott Irwin, who has said the exemptions don’t seem to undermine demand. Little, if any, waning of demand could be attributed to small refinery waivers, Irwin has said.

The petroleum industry is watching Censky, a former president of the American Soybean Association, about as closely as it’s tracking Perdue. As head of the soybean industry group, Censky advocated for biodiesel, made from soybeans and also tied to the renewable fuel standard. He’s now Perdue’s right-hand man.

Censky signaled USDA’s approach in a speech at the American Coalition for Ethanol’s spring fly-in on April 3.

In an address that a petroleum industry source said caught his attention, Censky said he wished USDA had a bigger say in determining refinery exemptions and would keep pressure on EPA. And he promised to keep pressure on EPA on the next ethanol battle too — how the agency sets minimum ethanol blending volumes after 2020, when the RFS law gives EPA more flexibility to set the levels without congressional dictates.

“We plan on playing a very robust role as EPA moves forward with that,” Censky told the group. “Whether we’re asked or not.”