EPA: Recent Perspectives on RFS and Agriculture

Recall that in December of 2016, agricultural policy observers expressed some measure of unease with President-elect Donald Trump’s pick to head the Environmental Protection Agency (EPA), Oklahoma Attorney General Scott Pruitt.  As The Wall Street Journal stated at the time, “After campaigning as a strong supporter of the use of ethanol and other biofuels in the nation’s gasoline supply, President-elect Donald Trump has chosen a forceful adversary of those federal requirements to implement them.”  Nearly one year later, today’s update looks briefly at recent EPA action on the Renewable Fuel Standard (RFS), and Administrator Pruitt’s visit to Iowa on Friday.

EPA- RFS

In September of this year, after EPA released a proposal to reduce the volume requirements for biodiesel for 2018 and 2019 under the RFS, several farm state senators, including Republicans Joni Ernst and Chuck Grassley of Iowa, brought political pressure on the EPA to “drop this terrible plan.”

By October, Administrator Pruitt had sent a letter to Iowa Sens. Chuck Grassley, Joni Ernst and other Midwestern lawmakers committing to at least maintain current blending requirements.  (See, “After Pressure from Senators, Iowa Governor- Trump Administration Signals RFS Support,” for details).

With this background in mind, Donnelle Eller reported in Friday’s Des Moines Register that, “After battling efforts this fall to lower the renewable fuels mandate, Iowa political and industry leaders expressed mixed emotions with the new standard set for blending ethanol and biodiesel in the nation’s fuel supply.

On Thursday, the U.S. Environmental Protection Agency said oil companies must blend at least 15 billion gallons of the conventional corn-based ethanol into the nation’s fuel supply next year.”

The article noted that, “[EPA] set advanced biofuel levels at 4.29 billion gallons, including 288 million gallons of cellulosic biofuel.

“And the 2019 biodiesel levels of 2.1 billion gallons are unchanged from 2018.”

Ms. Eller pointed out that, “The Renewable Fuel Standard helps support prices for corn and soybeans, which have tumbled between as much as 50 percent since 2012, when they hit record highs following a widespread drought.

Iowa’s farm income last year tumbled to $2.6 billion, a 73 percent drop from 2011.

Iowa Ag News – Monthly Prices. USDA- National Agricultural Statistics Service- Upper Midwest Regional Field Office (November 30, 2017).

Friday’s article added that, “The Iowa Biodiesel Board said the industry has more capacity than is being used.

“‘These flat volumes send a weak signal to the market at a time when our plants could significantly increase production and expand capacity,’ said Grant Kimberley, the board’s executive director.”

The Register article quoted Sen. Grassley as saying, “EPA’s announced renewable volume obligations fall short of the full potential of the U.S. biofuels industry.  That is disappointing, particularly the lack of increase for biodiesel levels and the cut in cellulosic level requirements.”

Russell Hubbard reported in Friday’s Omaha World-Herald that, “The final plan shows Pruitt sticking by [his] pledge — but not making aggressive moves to go beyond it.”

The World-Herald article noted that, “‘Setting the conventional biofuel target consistent with statutory levels helps to ensure that biofuels like corn-based ethanol will continue to play an important role in meeting demand for less-expensive, cleaner-burning transportation fuels,’ said Todd Sneller, Nebraska Ethanol Board administrator.”

On the other hand, the article added that, “‘Unfortunately it appears that EPA is bowing the knee to King Corn,’ said Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, which lobbies for oil companies. ‘We think this action is bad for U.S. manufacturing and American consumers and encourage Congress to finally fix the RFS.'”

Hiroko Tabuchi noted on Thursday at The New York Times Online that, “The [EPA] decision is a rare setback for the oil industry under a presidency that has filled its ranks with fossil fuel advocates and embarked on a rollback of rules aimed at reducing the industry’s regulatory obligations.”

And, Reuters writer Jarrett Renshaw and Richard Valdmanis reported on Friday that, “U.S. President Donald Trump has agreed to meet with representatives of the oil refining industry and their legislative backers to discuss the nation’s biofuels program, according to two sources briefed on the matter.”

The article noted that, “The White House meeting could set the stage for negotiations over possible legislation to overhaul the U.S. Renewable Fuel Standard – a 2005 law that requires refiners to blend increasing amounts of biofuels like ethanol into the nation’s gasoline each year, the sources said, asking not to be named.

“While the regulation would be a boon to the Midwest corn belt, refining companies oppose it because it cuts into their petroleum-based fuel market share, and because they say the blending requirement costs them hundreds of millions of dollars.”

Friday’s article added that, “It is unlikely Trump would be able to move to reform the biofuels program without buy-in from the corn coalition.

“Senator Chuck Grassley of Iowa, a vocal biofuels backer, has said that such a meeting would be a ‘waste of time.’ His office declined to comment on whether Grassley would attend. ‘No meeting has been scheduled,’ his spokesman Michael Zona said.”

Administrator Pruitt’s Friday Visit to Iowa

DTN Ag Policy Editor Chris Clayton reported on Friday that, “With a largely friendly crowd of central Iowa farmers and agribusiness types, EPA Administrator Scott Pruitt on Friday highlighted his agency’s recent work on biofuels and Clean Water Act regulations while pointing to general overall American optimism under Donald Trump’s presidency.”

Mr. Clayton indicated that, “Pruitt also said the other announcement that didn’t draw as much attention was the decision to deny several petitions to shift the point of obligation in the RFS from refiners to retails.

“‘That was something that, as we looked at that, we wanted to provide clarity in the market, and that was very important to do,’ Pruitt said to applause. ‘That, along with the volume obligations being done on time, will provide a lot of certainty.'”

The DTN article also noted that, “Looking at the controversial Clean Water Act rule defining waters of the U.S., Pruitt said the 2015 rule was so broad that dry creek beds, ephemeral streams and drainage ditches could be regulated. He talked about a conversation with an Army Corps of Engineers staffer who pointed to a drainage ditch and called it a waters of the U.S.

“‘That shows you how far we have come,’ Pruitt said. ‘There’s no way Congress intended, in the early 1970s, to include those types of water bodies, if you want to call them that, as waters of the United States.’

“Withdrawing the 2015 WOTUS rule doesn’t mean EPA is deregulating, Pruitt said. EPA will provide a substitute rule ‘that is consistent with the text’ of the Clean Water Act. The new definition is going to come in 2018, he said.”

Donnelle Eller reported in Saturday’s Des Moines Register that, “And Pruitt said EPA is working to clarify which tributaries fall under federal oversight through a new Waters of the U.S. rule after repealing an Obama administration rule that critics complained was too broad.

‘If the impetus behind the rule — behind the 2015 rule — was clarity … the previous administration failed miserably,’ Pruitt said. ‘It created substantial confusion across the country.’

“Pruitt, taking only a few carefully selected questions from host Bill Couser, a cattle producer, said farmers are the first ‘conservationists and environmentalists.'”

Keith Good

Keith Good is the social media manager for the farmdoc project at the University of Illinois. He is well known in agricultural circles for the daily FarmPolicy.com News Summary.