Trump admin policy aims to boost ethanol blending

Source: By Marc Heller, E&E News reporter • Posted: Sunday, October 6, 2019

The Trump administration announced plans to boost biofuel blending in the nation’s fuel supplies beginning next year. EPA

The Trump administration plans to boost biofuel blending in the nation’s fuel supplies beginning next year, while continuing to let small petroleum refineries avoid the mandates in certain circumstances, officials said today.

In a joint news release, EPA and the Department of Agriculture said a proposal — likely released next week — will open the way to including more than 15 billion gallons of ethanol a year in the nation’s fuel supply, the level mandated by the renewable fuel standard, and ensure that exemptions given to small refineries don’t undercut the overall mandate.

The announcement didn’t delve into details, such as the volumes to be required, saying those would come in a formal proposal subject to public comment, building off EPA’s annual rulemaking for next year’s biofuel requirements. Proposed volumes would be based in part on a rolling three-year average of biofuel levels, an EPA official told reporters in a conference call today.

A new policy will be in place by the end of this year, the administration said.

Today’s announcement left many questions unanswered, including whether the proposal would make up for small refinery waivers by requiring other refiners to blend more. Ethanol groups said a policy resembling that appears to be in the works. The administration recently awarded 31 exemptions based on economic hardship, a provision allowed by the Clean Air Act.

In addition, the administration said USDA would seek to expand biofuel infrastructure through the budget process, allowing for increased ethanol supplies. And the administration will propose regulations to streamline labeling of higher-ethanol fuel called E15, which is 15% ethanol, to ease its introduction into the fuel supply nationwide without seasonal restrictions, the departments said.

The administration said it will also “continue to evaluate options” for changes in the renewable fuel credit market, addressing complaints about price spikes and transparency. Officials didn’t elaborate, but groups on both sides of the biofuel battles agree the markets could benefit from greater openness.

Agriculture Secretary Sonny Perdue and EPA Administrator Andrew Wheeler praised the proposal, and President Trump, in statements.

“The President recognizes that American farmers are the most productive in the world, and he has found a way to pursue policy that promotes economic growth and supports our producers,” Perdue said. “Building on the success of the year-round E15 rule, this forward-looking agreement makes improvements to the RFS program that will better harness the production of our farmers and ensure America remains energy dominant.”

Wheeler said, “President Trump’s leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our Nation’s farmers and providing greater energy security.”

The forthcoming policy aims to ensure that the use of ethanol in gasoline continues to gradually climb while sparing petroleum refineries high compliance costs — a balancing act the administration has played since taking office. Refineries are required to either blend ethanol into fuel or to buy renewable fuel credits from other companies at market prices, and some companies say the costs are an economic burden.

Biofuel advocates praised the announcement for maintaining required volumes even as small refineries will continue to be able to receive exemptions in limited circumstances. Critics of the renewable fuel standard predicted pain for refineries.

“The president listened to all points of view and delivered. Small refineries can still apply for waivers while biofuels are able to blend the legally-required amount,” said Sen. Chuck Grassley (R-Iowa) in a news release. “This plan will fix EPA’s exemption process and help farmers and biofuels producers going forward.”

The Renewable Fuels Association cheered the proposal and said it’s the beginning of a process.

“The plan announced today takes a crucial step toward repairing the damage done by EPA’s small refinery waivers and re-establishes the RFS as a driver of growth in the production and use of low carbon renewable fuels,” said RFA President and Chief Executive Officer Geoff Cooper in a statement.

Senate Environment and Public Works Chairman John Barrasso (R-Wyo.) warned against shifting biofuel requirements to refineries that don’t receive exemptions.

“Any plan to transfer small refineries’ biofuel obligations to other refineries will do more harm than good,” Barrasso said. “No one should be surprised if it leads to closed refineries, lost jobs, and higher fuel prices. Refineries — both large and small — employ millions of Americans nationwide.”

Barrasso added, “This proposal risks mass layoffs and higher gasoline and diesel prices. It’s not a winning strategy for American workers or our nation’s economy.”

Today’s announcement isn’t likely to dull the conflict between supporters and critics of biofuel mandates. Pro-biofuel groups have continually fought for bigger volume requirements, saying the livelihoods of farming communities rely on them, while petroleum groups and some environmental organizations are pushing for limits on the mandate, or for scrapping the RFS altogether.

The political climate is also helping to shape the debate, as Trump tries to balance the interests of farmers in Midwest battlegrounds, hurting from the administration’s trade and tariff fights, against oil interests that are key in big electoral states such as Texas.

Litigation is likely because it’s not clear whether the administration’s moves are allowed under the Clean Air Act, the overarching law behind the renewable fuel standard, said Scott Segal, a partner at Bracewell LLP.

The announcement caps a monthslong public relations and lobbying campaign by biofuel advocates and petroleum industry groups.

Biofuel groups yesterday said a new policy boosting the alternative fuel was desperately needed to restore demand and stem the idling of ethanol plants, which they attribute to the small refinery exemptions EPA has granted to more than 80 petroleum facilities during the Trump administration.

“It can’t come soon enough,” Cooper said in a conference call with reporters. “That has absolutely had an impact on our markets.”

RFA Chairman Neil Koehler, who’s also chief executive officer of Pacific Ethanol Inc. in Sacramento, Calif., said his company has trimmed jobs at its headquarters and recently shut a plant in Nebraska, costing 45 workers their jobs.

“This industry is bleeding red ink right now,” Koehler said.

Cooper and other biofuel supporters said a change was needed ahead of the corn harvest season, about to begin, as some corn growers aren’t sure where they’ll be able to sell their product, especially with the recent closure or temporary idling of 18 plants.

Petroleum industry advocates, citing statistics from the U.S. Energy Information Administration, say demand for ethanol hasn’t suffered as a result of the small refinery exemptions. Requirements for additional ethanol to satisfy the administration’s policy are likely to be met with imported ethanol, they said.

“Domestic ethanol production is already robust and blending levels are high,” Segal said. “Therefore, there is no evidence that arbitrary expansions in mandated ethanol use will come from domestic production. If history is any guide, additional volume almost certainly will be satisfied by imports, not America ethanol production.”