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Serving: United States
Ethanol production plant utilizing corn as a feed stock located in the middle of farm land in the Dakotas. photosbyjim/iStock/GettyImages

Trump's EPA may reduce biofuel waivers

Announcement follows court ruling that EPA wrongly waived three refineries from requirements to use biofuels.

By Jennifer A. Dlouhy and Jennifer Jacobs

Trump administration officials have decided to pare the number of oil refineries granted waivers from biofuel mandates, according to two people familiar with the matter.

The decision in response to a January court ruling represents a win for biofuel producers who have battled the exemptions and accused the Trump administration of siding with the oil industry on the issue.

The terrain is politically fraught for President Donald Trump, dividing two of his key political constituencies: agriculture and the oil industry. Trump promised to support corn-based ethanol while campaigning in Iowa four years ago but also has cultivated support among Rust Belt voters and the oil industry that oppose the biofuel mandate.

An Environmental Protection Agency spokeswoman declined to comment, though EPA Administrator Andrew Wheeler told reporters on the sidelines of an agriculture conference on Wednesday that the agency would “hopefully have an announcement shortly.”

”We are still trying to figure out the implications” of the court ruling, Wheeler said.

A three-judge panel of the Denver-based 10th Circuit Court of Appeals ruled in January that the EPA wrongly waived three refineries from requirements to use plant-based fuels.

In their ruling, the judges said the federal law mandating biofuel limits waivers to situations involving “extensions” and pointed out that none of the three refineries at issue had “consistently received an exemption” in previous years.

In response, administration officials have decided to apply the ruling nationwide and propose a new slate of biofuel quotas for 2020, according to the people who asked for anonymity to discuss internal deliberations. That approach means that only a handful of oil refineries -- those that have consistently won exemptions since 2008 -- likely will qualify for the waivers going forward, down from dozens in recent years.

Oil industry advocates have been lobbying the White House to appeal the 10th Circuit ruling, arguing that if it is applied nationwide, a dramatic reduction in exemptions would put small refineries at risk of closing -- including some in swing states key to Trump’s re-election.

Renewable identification numbers, the tradable credits refineries use to show compliance with biofuel mandates, had already climbed since the court ruling in anticipation that fewer facilities will be waived from annual blending quotas.

On Wednesday, renewable identification numbers tracking 2020 consumption of conventional renewable fuel, including ethanol, jumped 37.5% and were trading at 44 cents apiece, a nearly two-year high. The last time RINs tracking conventional biofuel compliance traded this high was April 2, 2018, according to data compiled by Bloomberg.

Higher costs for those compliance credits -- coupled with fewer refinery waivers -- would “inflict damage on energy security and jobs in the very places that President Trump is focusing for re-election,” said the Fueling American Jobs Coalition, an organization that represents union workers, independent oil refiners and small retailers.

The approach would “eviscerate the small refinery exemption that has been a lifeblood not only to small refineries but the communities that rely on these facilities,” said Chet Thompson, president of the American Fuel and Petrochemical Manufacturers.

Refining executives and allies met with representatives of the EPA and the White House on the issue Tuesday and Wednesday. White House officials also met to discuss the biofuel policy matter on Wednesday, according to one person familiar with the deliberations.

Several drafted letters pressing Trump on the issue also are circulating among oil industry allies on Capitol Hill, raising the possibility that last-minute pressure could spur the White House to alter course. Previous Trump administration decisions on biofuel policy have been upended amid fierce lobbying. Oil advocates also could seek to revive shelved proposals to contain the cost of compliance credits.

Even if the Trump administration does not appeal the 10th Circuit ruling or ask for the full court to rehear the case, other parties in the case -- including HollyFrontier Corp. and Wynnewood Refining Company LLC -- are expected to seek further review.

Federal law authorizes waivers for small refineries facing an economic hardship, and for years, they were granted to some facilities automatically.

Praise From Grassley

However, the number of those exemptions has surged during the Trump administration, and biofuel producers say they have been handed out too freely. After the EPA exempted 31 refineries from 2018 quotas, farmers and renewable fuel producers in Iowa and other Corn Belt states blasted the administration and accused Trump of turning his back on the sector.

American Farm Bureau spokesperson Cole Staudt said small refinery exemptions have undermined the integrity of the U.S. Renewable Fuel Standard, causing “a ripple effect of negative consequences for our energy security, agricultural demand and the rural economy.”

Senator Chuck Grassley, an Iowa Republican, said in a Twitter post on Wednesday that he hoped the reports were true and was glad that Wheeler seemed to be “taking farmer concerns seriously.”

--With assistance from Mario Parker and Mike Dorning.
To contact the reporters on this story:
Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net;
Jennifer Jacobs in Washington at jjacobs68@bloomberg.net
To contact the editors responsible for this story:
John Harney, Elizabeth Wasserman
© 2020 Bloomberg L.P.
TAGS: EPA Corn ethanol
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