Pruitt Departure Allows for ‘Reset’ Between Trump and Ethanol

Source: By Mario Parker, Bloomberg • Posted: Monday, July 9, 2018

Scott Pruitt’s resignation as administrator of the Environmental Protection Agency presents an opportunity to reset the relationship between part of the Trump administration and the biofuels industry.

Pruitt had become persona-non-grata among ethanol proponents, the majority of which comprise a large swath of Trump’s rural agricultural base, who produce the crops that turn into biofuels. Waivers for small refineries from the Renewable Fuel Standard, the law that compels oil refiners to use biofuels, created tension between ethanol producers, farm-state leaders and Pruitt.

Biofuel puts agriculture at odds with oil refiners because more ethanol use means less gasoline consumption. It also squares off two parts of Trump’s base: farmers and the energy industry.

Trump pledged to support ethanol during his presidential campaign and then he personally waded into the battle between agriculture and oil with a series of White House meetings on ways to tweak the mandate. Still, tensions between Pruitt and farmers heightened after the EPA’s June 26 proposal for 2019 biofuel quotas, which some saw as more favorable to the oil industry because there was no mention of curbing the waivers.

The EPA also jettisoned a plan to incorporate an additional 1.5 billion gallons of biofuel requirements in last week’s proposal to make up for the potential waivers granted to small refineries. The agency said that it wouldn’t be taking public comments on the issue.

‘Negotiating Room’

Pruitt made a “scorched Earth ruling on the way out the door,” Scott Irwin, an agricultural economist at the University of Illinois Urbana-Champaign, said by phone Thursday. “That may mean there is some negotiating room” now that he’s left, Irwin said.

At the center of the debate are Renewable Identification Numbers, or RINs — tradeable credits used to show compliance with the federal biofuels mandate. Refiners say that the costs of adhering to the biofuel law and buying the credits are too onerous. Since Sept. 1, RINs prices have dropped 75 percent on speculation that EPA policy would shift to favor the oil industry more.

Prices for the credits tracking ethanol targets jumped as much as 31 percent to 27.5 cents apiece on Thursday after Trump tweeted that Pruitt resigned, according to broker data compiled by Bloomberg. The gain signaled that traders see Pruitt’s departure as a door opening for the ethanol industry.

Without Pruitt, the EPA may “potentially make more sparing use of the” contested waivers, ClearView Energy Partners, said in a report Thursday.

Grassley Comments

Republican Senator Chuck Grassley, from Iowa, the largest corn-producing state, warned last month that he would call for Pruitt’s resignation if the EPA continued exempting small oil refineries from the biofuels mandate.

After the Pruitt announcement, Grassley said “President Trump made the right decision,” and that he hopes the acting administrator Andrew Wheeler “views this as an opportunity to restore this administration’s standing with farmers and the biofuels industry.”

Likewise, agricultural groups from the Renewable Fuels Association and Growth Energy to the National Corn Growers Association, hailed Pruitt’s departure.

The Fueling American Jobs Coalition, which supports the oil refiners, said in a statement Thursday that the RFS had nothing to do with Pruitt’s departure and reiterated that the EPA is following the law in issuing waivers. It also said that agriculture hasn’t been negatively impacted under the current administration.

For both fans and foes of the mandate, Wheeler will be seen as a fresh face. He doesn’t have the baggage Pruitt did from more than a year of struggling with ethanol backers and the oil-refining industry over the policy.

But fundamentally, he’s in the same difficult position as Pruitt: forced to administer a program that amounts to a zero-sum contest over gasoline market share.

Wheeler, a former energy and environmental lobbyist for Faegre Baker Daniels, is no stranger to the debate. He previously represented Growth Energy, an ethanol trade group that’s advocated for the EPA to allow year-round sales of higher blends of ethanol, according to a recusal statement from Wheeler.

— With assistance by Jennifer A Dlouhy