Trump’s ethanol edge

Source: by John Siciliano, Washington Eaxminer • Posted: Sunday, May 19, 2019

President Trump’s ethanol policy could help him outpace competitors in the 2020 presidential election in Iowa, according to ethanol’s biggest supporter in the Senate, Republican Chuck Grassley.

The senior senator from Iowa believes Trump ran on ethanol and is delivering on his promise to expand sales of the fuel with a new plan slated to be finalized June 1. This gives the president a leg up over his challengers, who can’t claim nearly the same support for the corn-based fuel and farm country, according to Grassley.

“This whole thing is kind of connected to President Trump and his reelection,” said Grassley in an interview with the Washington Examiner.

Grassley said Trump’s personal attention to ethanol and to fulfilling his promises to Iowa farmers over the past two years will matter a lot in the upcoming presidential race.

Grassley, 85, has been the Senate’s most staunch defender of ethanol for decades, especially in terms of maintaining its share of the U.S. gasoline supply.

One of the big promises Trump is aiming to fulfill for Iowa and corn farmers, in just a matter of weeks, is making higher 15% blends of ethanol fuel available year-round by removing restrictions on the sale of those blends, referred to as E15, during the summer months.

“This has been such a big balancing act since 18 months ago,” Grassley said. “We probably wouldn’t be where we are without Trump’s personal involvement in it,” he added.

Trump had been personally present in at least three White House meetings over the last two years regarding the development of what some call a “grand bargain” between the ethanol and oil industries.

The farmers want to open the summer driving season, the largest seasonal market for transportation fuel, to more ethanol use. But oil refiners want to ensure they can manage the costs of complying with the federal Renewable Fuel Standard, which mandates that they blend an ever-increasing volume of ethanol and other renewable fuels into the nation’s fuel supply, or purchase credits if they cannot.

“What they’re putting together [at the Environmental Protection Agency] is part of a very delicately written compromise to satisfy everybody as much as we can,” Grassley said.

Agency chief Andrew Wheeler has assured Grassley that the rule will be finalized and made effective by June 1.

But there could be some electoral pitfalls for Trump. One would be if, for some reason, the E15 plan flounders, or if he doesn’t manage to secure trade deals with China, Canada, and Japan. Trade agreements are increasingly important to farmers.

“If he gets these trade issues [with] Canada, China, hopefully with Japan, wrapped up, that’s going to be a bigger issue than even ethanol and E15,” Grassley said.

Grassley says without the trade deals in place, the benefits of the E15 plan are canceled out.

Retaliatory tariffs levied against U.S. agricultural producers have done harm to farmers, who are bearing the brunt of economic harm from the trade war.

Republican Sen. Joni Ernst of Iowa said that farmers are depending on the ethanol rule to help them survive the trade wars, and are holding the president to his word to get it done.

“We’re pushing it,” Ernst added. “We are one step closer to finalizing the rule.”

Ernst has become a key figure alongside Grassley in holding Wheeler to account for meeting the president’s promises to Iowa and the ethanol industry.

Ernst has not shied away from being critical of the administration, especially as the Environmental Protection Agency has granted dozens of exemptions to oil refiners not to blend ethanol under the federal Renewable Fuel Standard. The agency has the authority to exempt small refineries that may be adversely affected by the requirement.

“We feel the administration should not be granting these small refinery waivers, and we will continue to press them on that issue, as well,” Ernst said.

“Some of those waivers have gone to big companies like Chevron and ExxonMobil, and they’re highly profitable companies,” Ernst said.

Most U.S. refiners have to buy ethanol credits to comply with the agency’s renewable standard, but in recent years they have protested the extreme volatility in the price for those credits.

Refiners are paying hundreds of millions of dollars each year to buy the credits in order to comply with the nation’s ethanol program.

The E15 rule would make the ethanol credit market more transparent in tandem with allowing the sale of E15. The move to add more transparency in the market is something both Grassley and Ernst support.

Ernst welcomes more transparency in the credit market so they can see who exactly is receiving “small refinery” exemptions.

“Because even though they are a small refinery, if they are connected to a much larger entity that is highly profitable, I am a little skeptical about waivers going to those folks,” she said.