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The shutdown may delay the administration's ability to steer through the approval for year-round sales of E15.

Bloomberg, Content provider

January 7, 2019

4 Min Read

by Mario Parker and Jennifer A. Dlouhy

Bruce Buchanan was so elated with Donald Trump’s October vow to allow higher sales of corn-based ethanol that he carved a 60-acre thank you note in his Indiana cornfield.

Now, though, the president’s actions have him worried. The government shutdown that Trump says could last "a long time" without funding for a border wall may hurt farmers by delaying the administration’s ability to steer through the approval for year-round sales of a 15% ethanol blend for gasoline before the summer begins. That’s up from 10% allowed now.

The increased sales would certainly be helpful. Farm income has dropped in five out of the last six years. And this season, growers have been been hamstrung in selling their crops by an ongoing trade war with China. While Buchanan supports Trump on border security, the shutdown is troubling for a farming community that’s clearly struggling, he said.

“It’s not all fun and games out here,” said Buchanan, a third-generation farmer from Fowler, Indiana, in a telephone interview. “It’s a daily challenge.”

The schedule for getting approval of the higher ethanol blend was already ambitious prior to the shutdown. The Environmental Protection Agency had promised to present a final rule in May, just four weeks before existing restrictions on 15% ethanol become binding. Now, though, the agency is largely inoperative.

The government shutdown is now 14 days old. “If you start getting in beyond these two weeks, here, then it does begin to ramp up the pressure because there won’t be people there to work on this stuff,” said Paul Argyropoulos, president of Policy Nexus Advisors in Damascus, Maryland, and a former senior policy adviser in the EPA’s Office of Transportation and Air Quality.

Steep Tariffs

Ethanol could use a boost. Like soybeans and pork, it’s faced steep tariffs from Beijing in the tit-for-tat trade war between the U.S. and China.

Companies including Green Plains Inc. and Pacific Ethanol Inc. have shed jobs and curtailed production. On Thursday, Cargill Inc., the largest privately-held U.S. company, cited “historically low ethanol prices” as one of the reasons one of its segments posted lower quarterly earnings from a year ago.

“From the outset, the EPA gave itself very little wiggle room to complete the year-round E15 rule making before summer, so the shutdown is making a tight time line even tighter,” said Geoff Cooper, president of the Renewable Fuels Association.

The proposed change has been controversial. Agricultural and oil-refinery interests have battled over whether the EPA has the authority to grant the higher blends for the summer months. Once the EPA issues the ruling, it will be legally challenged, Argyropoulos said.

Under current rules, sale of the so-called E15 fuel is blocked from June 1 to Sept. 15 in areas like California, where smog is a problem in hot weather. Only about 1,675 of the nation’s 122,000 or so stations offer it.

Payment Delays

Farmers are having a hard time catching a break. The partial U.S. government shutdown is also raising questions about delays for the second-round of payments under the market facilitation program that the Trump administration initiated to help farmers hurt by the trade war.

U.S. Senator Patrick Leahy, a Democrat from Vermont and vice chair of the appropriations committee, said Thursday that the partial government shutdown has left farmers to “fend for themselves” as they try to seek loans and get the second round of payments under the U.S Department of Agriculture’s market facilitation program.

“With the passage of the 2018 Farm Bill, farmers and ranchers need information -- right now, as a new growing season looms -- on how the law will affect their operations heading into the planting year, but no one is in the office or staffing the phones to answer those questions or sign up producers for new programs,” Leahy said in a speech from the Senate floor.

‘Fend for Themselves’

“Farmers have been left to fend for themselves while the President holds their safety nets hostage, to secure funding for his border wall,” Leahy said. The White House didn’t immediately respond to a message left for comment

Biofuel use in the U.S. is governed by a policy known as the Renewable Fuel Standard, or RFS. The EPA may have to place a slew of other related matters to the regulation on hold during the shutdown, according to Neelesh Nerurkar, vice president and senior analyst at ClearView Energy Partners in Washington.

That includes reform of the trading market for Renewable Identification Numbers, or RINs, that are used to comply with the RFS, the planned reset of consumption targets for 2020 to 2022 and pending small refinery exemptions from the regulation, Nerurkar said.

“The longer staff cannot work on these RFS actions, the more challenging it makes an already challenging first quarter,” Nerurkar said in an email.

To contact the reporters on this story: Mario Parker in Chicago at mailto:[email protected] ;Jennifer A. Dlouhy in Washington at [email protected]

To contact the editors responsible for this story: James Attwood at mailto:[email protected]

Reg Gale, Millie Munshi

© 2019 Bloomberg L.P

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