Trump’s plan to boost ethanol could quickly get sidelined

Source: By John Siciliano, Washington Examiner • Posted: Wednesday, August 15, 2018

President Trump’s plan to boost the amount of ethanol in the nation’s gasoline supply is quickly passing its window of opportunity to be of any benefit to farmers or consumers this year.

On top of that, a senior Senate aide close to the pro-ethanol camp led by Sen. Chuck Grassley, R-Iowa, said “there is debate” over whether it will take legislation to enact the changes Trump seeks.

“We view it as a technical correction,” the aide said, meaning that the Environmental Protection Agency and the White House have the authority to make the change administratively without legislation to allow 15-percent ethanol fuels to be sold year round.

But others in the House of Representatives say there is no substitute for legislation when it comes to the EPA waiver Trump wants, entailing that it will take more time and be more complex to make Trump’s plan a reality.

“Executive actions aren’t a substitute for legislation,” said Jordan Haverly, spokesman for Rep. John Shimkus, R-Illinois.

Shimkus, chairman of the Energy and Commerce Committee’s environment panel, is in the middle of drafting a comprehensive bill to reform the EPA’s Renewable Fuel Standard program, which requires oil refiners to blend ethanol and other biofuels into the nation’s fuel supply.

“Congressman Shimkus has said all along in this debate that the only path to an enduring and equitable deal for farmers, refiners, ethanol producers, automakers, and consumers — especially one that won’t spend more time in court than on the books — is through Congress,” said Haverly.

The higher fuel volatility rating, or Reid vapor pressure, of E15 fuel prevents it from being sold in the summer months from May through August when fuel demand is at its peak.

Most of the U.S. gasoline supply contains 10 percent ethanol year round, but allowing 15 percent blends to be sold would increase demand for corn ethanol and help farmers weather a difficult global grain market.

Farmers have complained that Trump’s own trade policies are hurting the market for grain. Their complaints forced the president to push the ethanol plan to the forefront last month after announcing a $12 billion assistance package meant to help farmers cope with higher tariffs by imposed by China and Europe in retaliating against Trump.

Haverly could not confirm whether the House bill addresses the E15 waiver directly, although he said that Shimkus is supportive of extending the waiver through legislation.

A similar bill is being drafted in the Senate by Republican Majority Whip John Cornyn of Texas.

Trump told an audience in Iowa last month that the administration is “very close” to enacting the 12-month E15 waiver, but admitted it is a “very complex process.”

The Senate aide close to Grassley said it won’t do much good for farmers or refiners this year even if he moves forward soon, because the summer driving season is about over.

“We want it as soon as possible, but because the four months [you can use E15] are the same four months every year, it seems like we missed this year,” the aide said. “So, the new time frame from our perspective comes however quickly it needs to be to make sure its next summer’s driving season.”

Trump had endorsed a year-round waiver for months as part of deal between oil refinery supporters and ethanol and farm state lawmakers. The White House was trying to find a way to reduce the cost for small refiners who have to purchase expensive Renewable Identification Number credits, or RINs, to meet the EPA’s annual ethanol blending requirements.

The White House deal would direct the EPA to issue a waiver for E15, while taking steps to reduce the cost of RINs for the refiners.

But the deal was scrapped after an outcry by Grassley and other ethanol supporters on Capitol Hill, who said the concession to refiners outweighed any benefit from the waiver. Trump’s remarks last month signal that he still wants to push forward with the E15 plan, but it is unsure what he will give to refiners.

“Our friends on the other side of this issue always want something for it… and usually what they want is so bad that it’s not a good deal,” the aide said. “The negatives of whatever they want usually, in our opinion, outweigh the positives of RVP.”

The Senate aide pointed out that a decision allowing the sale of E15 would eventually reduce RIN prices and help refiners, while sending a positive signal to the market to begin building out the infrastructure to begin using more of the fuel.

“But keep in mind, as soon as the decision is made, that’s a signal to the market,” the aide said. “So, you get new infrastructure for E15, as well as ideally the RIN market will drop a little bit more.”

The ethanol industry’s lead trade group is making a similar argument in lobbying for more sales of E15.

Geoff Cooper, executive vice president for the Renewable Fuels Association, argues that refiners “should get onboard with lifting the seasonal ban on E15” because doing so will generate more ethanol credits and therefore lower their prices. Refiners that do not have blending infrastructure — there are many that do not — must buy the credits, or RINs, on the open market to meet the EPA’s Renewable Fuel Standard requirements.

Cooper says he believes the EPA “clearly has the authority and ability” for permanently removing the 30-year-old “barrier” for higher ethanol blends like E15, referring to the EPA’s fuel pressure restrictions on using the fuel during the summer months.

He noted that even former EPA Administrator Scott Pruitt, “whose actions on the RFS generally favored refiners, acknowledged that the EPA could administratively grant RVP parity for E15.”

But the oil industry thinks the EPA should be defending consumers from what it calls the harmful effects of higher ethanol blends like E15 and even higher amounts of ethanol in gasoline.

“Serious vehicle and retail infrastructure compatibility issues continue to exist with gasoline containing more than 10 percent ethanol,” Patrick Kelly, the American Petroleum Institute’s senior fuel adviser, told the EPA at a public hearing on the 2019 Renewable Fuel Standard last month. “Three out of four cars on the road were not designed for higher ethanol blends like E15, and history demonstrates that motorists have largely rejected [higher blends such as] E85.”

Other industries, such as the boating industry, are also raising the alarm over misfueling if the sale of 15-percent blends is made year round.

“Sixty-five percent of people assume that any gas sold at retail gas stations is safe for all their products, when in fact federal regulation prohibits E15 use in small engines,” said Thom Dammrich, president of the National Marine Manufacturers Association. “These engines — like those in boats, lawn mowers, and motorcycles — suffer immediate damage when fueled with blends exceeding 10 percent ethanol, thus voiding their warranty and saddling consumers with high repair and replacement costs.”

He wants the EPA to put in place an education program to ensure consumers understand the effects of higher ethanol blends. The program would be implemented at retail gasoline stations.

“Moving toward higher levels of ethanol when we are swimming in gasoline in this country is ridiculous right now,” said John McKnight, the marine manufacturer group’s head of environmental safety. “But nobody is going to make a decision based on boats, they are going to make a decision based on politics. And it all depends on how much pressure is exerted on the EPA by the politicians.”

The group’s lobbying team will be making the rounds on Capitol Hill to make sure any legislation ensures that proper labeling for E15 is included in any approval of year round sales of higher ethanol fuel.

Meanwhile, McKnight is looking for additional ways the EPA can help advance an alternative to using more corn-based ethanol in gasoline called biobutanol. The renewable fuel can be added to gasoline at higher volumes than 15 percent with no threat of engine damage.

“I believe you’ll see a public backlash if they go to E15 at some point because people will misfuel,” McKnight said. “There’s no doubt about that.”