Governors' Biofuels Coalition

President Trump on Thursday sought to soothe U.S. farmers by signaling a move aimed at promoting the use of ethanol, a corn-based fuel and revenue source for some farmers.

The move would reassure a key Trump constituency that has been rocked by the U.S.-China tariff tension, including threats from Beijing to raise levies on imports of U.S. soybeans.

“We’re going to raise it up to 15 percent and raise it to a 12-month period,” Trump said during a White House photo opportunity, apparently referring to E15, a motor fuel containing 15 percent corn-based ethanol. Currently, E15 cannot be sold year round because of seasonal air pollution concerns. Under the federal Renewable Fuels Standard, fuel at the gas pump today usually contains only 10 percent ethanol.

Trump’s ethanol suggestion also throws a bone to Iowa Republican Sen. Charles E. Grassley, a strong supporter of the ethanol industry who chairs the powerful Judiciary Committee.

But Trump’s gesture was undercut by the Environmental Protection Agency, which has been giving small refineries “hardship” exemptions from congressionally mandated renewable-fuel requirements — which ethanol advocates say will decrease the use of the fuel.

There are more than 50 small refineries with up to 75,000 barrels a day of capacity each in the United States, including ones that belong to ExxonMobil and Chevron. The firm Andeavor has four small refineries. The EPA exemption, meant to help financially ailing refiners, means the companies could save tens of millions of dollars or more that they would otherwise have had to spend fulfilling the requirements of a complex system of credits.

“Is it the Administration’s position that companies making billions of dollars in profits are experiencing hardship?” Grassley and four other senators from Midwestern states asked in an angry letter released early Thursday evening. They accused EPA Administrator Scott Pruitt and oil companies of being engaged in “another backdoor attempt … to destroy the Renewable Fuel Standard and circumvent congressional intent,” they wrote.

The level of ethanol in motor fuel has long divided companies, farmers and environmental groups, pitting state lawmakers against big oil companies and raising questions about the homegrown fuel’s environmental costs and benefits.

And it has become a touchstone for presidential hopefuls seeking to win votes in Iowa. Trump during his campaign promised to promote ethanol.

“Is this going to make up for, you know, losing markets in China, or some of the other things? No,” said Bob Dinneen, president of the Renewable Fuels Association, which applauded the move. “But it is, I think, more than just a gesture. This will have a meaningful and positive impact on an important value-added market that corn growers have developed.”

Pruitt on Monday briefed Trump and senators such as Ted Cruz (R-Texas) who have been outspoken on the issue, according to lobbyists.

The controversy over E15 has been sparked by the Renewable Fuel Standard, a policy Congress adopted in 2005 and 2007 legislation that in effect created today’s large ethanol industry — and its battles with oil companies and gasoline refiners — by requiring ever-increasing volumes of ethanol in gasoline.

That has created increasing friction as the percentage has now eclipsed 10 percent of all fuel — and the E15 policy would lead to still more expansion.

The oil industry, backed by the auto industry, has complained that going beyond 10 percent breaches a “blend wall” and would damage some car engines ill-equipped to handle the fuel. The American Petroleum Institute also cites potential hazard to small motors in lawn mowers or leaf blowers. Energy Department studies suggest that the threat to automobiles is overblown.

It’s just one of many controversies sparked by the Renewable Fuel Standard, which has also been accused of driving up food prices and leading to large environmental impacts in the Midwest.

“Raising the ethanol limit to 15 percent blend year round would be a huge win for the agriculture lobby but just kicks the can down the road on implementing real reform to our nation’s ethanol policy, which is badly needed, and creates greater uncertainty for industry given the vulnerability of such a move in the courts,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University.

The long-standing complaint of ethanol manufacturers is that the EPA gives E10, but not E15, the necessary waiver to be produced year round. In blocking E15, the EPA has cited the risk of excessive volatile organic compounds during the summer.

“The thing that is keeping E15 from being sold year round today is the disparate treatment that EPA has been providing E10 and E15,” Dinneen said. While some refiners might choose to continue producing E10, Dinneen said he believes that if the new policy goes through, at least some fuel sellers, like Sheetz, will stock E15 year round.

Any policy change would ultimately depend on agency rulemaking, which is far more complex and slow-moving than a decree by Trump — and with the current scandals surrounding the EPA’s Pruitt, it’s unclear how that would proceed.

Meanwhile, senators have been weighing in. On March 15, a group of six farm-state lawmakers wrote to Trump urging him “to reject proposals designed to weaken — or waive — this key pillar of the farm economy.” They wrote that the policy “has been a lifeline for farmers, driving job growth and attracting billions of dollars of investment to rural areas where opportunities are needed most.”

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