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President Trump Opens Door to Increased Ethanol Use

On Tuesday, Bloomberg writers Jennifer A. Dlouhy and Mario Parker reported that, “President Donald Trump is moving to clamp down on a scandal-plagued $2.25 billion market in biofuel compliance credits, embracing reforms that could block Wall Street banks from trading them.

“Trump will direct his Environmental Protection Agency on Tuesday to pursue the changes as a way to quash manipulation and bolster transparency in the obscure Renewable Identification Number market, said a senior White House official. At the same time, Trump will order the EPA to take steps to enable the year-round sale of gasoline containing as much as 15 percent ethanol, according to the official, who discussed the planned announcement on the condition of anonymity.

By combining the policy announcements on Tuesday, Trump is trying to deliver on his campaign promises to support ethanol while also addressing some independent refiners’ concerns about the high cost of fulfilling U.S. mandates compelling them to use the corn-based fuel additive.

The Bloomberg article noted that, “But that is a difficult balancing act, and the president is bound to leave some faction displeased, said Scott Irwin, an agricultural economist at the University of Illinois at Urbana-Champaign.

“‘There is essentially no common ground,’ he said. ‘It’s devolved to the place, at least between corn, ethanol and oil refiners, as a zero-sum game.’ Anything Trump gives to one side he is taking away from the other, Irwin added.”

Dlouhy and Parker added: “Both steps require separate, formal rulemaking by the EPA, which could take months. Even then, there could be years of additional uncertainty, as foes in the oil industry have vowed to challenge an EPA waiver allowing year-round sales of E15 gasoline, arguing that the agency does not have the legal authority to issue it administratively, without further action from Congress.”

Feed Outlook / FDS-18i / September 14, 2018 Economic Research Service, USDA.  Corn used for ethanol is in yellow.

Donnelle Eller reported on the front page of Tuesday’s Des Moines Register that, “After months of false starts, President Donald Trump will tell Iowans on Tuesday during a campaign rally in Council Bluffs that he’s opening the door to year-round access to gasoline with higher ethanol blends.”

The Register article explained that, “About half of Iowa’s corn crop is used to make ethanol and a high-protein byproduct called distillers grain that’s fed to livestock.”

“USDA’s National Agriculture Statistics Service (NASS) second survey-based yield forecast for the 2018/19 corn crop reported a yield gain of 2.9 bushels per acre to 181.3 bushels from the previous forecast. If realized, this would produce a crop of 14,827 million bushels from the forecast 81.8 million acres to be harvested, 240 million bushels over last month’s forecast.” Feed Outlook / FDS-18i / September 14, 2018 Economic Research Service, USDA.

Ms. Eller also pointed out that, “E15 is banned during the summer months, based on concerns it contributes to smog, a claim ethanol advocates say is unfounded. Almost all gasoline contains 10 percent ethanol.”

And Financial Times writer Gregory Meyer reported Tuesday that, “More than a third of this year’s US corn crop is expected to be consumed by ethanol refineries, underlining the biofuel’s importance to growers.”

Mr. Meyer indicated that, “The move comes after Mr Trump has made other decisions that have vexed the agricultural sector. China has increased tariffs on US ethanol, shutting it out of a promising foreign market, in response to new tariffs from Washington. The EPA has also handed out dozens of exemptions from biofuels blending to US oil refiners.”

Reuters writers Jarrett Renshaw and Humeyra Pamuk reported Tuesday that, “The announcement capped a months-long effort by the White House to thread the needle between rival corn and oil industry interests, by boosting ethanol demand while also cutting costs for refiners.

In the end, Trump is moving ahead without the support of the oil refining industry, which wanted more in return for agreeing to lift the summer ban.

DTN Ag Policy Editor Chris Clayton reported Tuesday that, “As President Donald Trump headed to Iowa late Tuesday to announce year-round E15 and campaign for Iowa Republicans, there were questions over when EPA would propose such a rule and the expected legal challenges from biofuel critics.

“‘We are heading out to Iowa where we have a big statement to make, as you know, on ethanol and for our farmers,’ Trump said, ‘Likewise we are taking care of our refineries and our refiners and they have done a fantastic job but we want to get more fuel into the system, and this is a great thing. This is great for our farmers. It is a promise I made during the campaign and as you know I keep my promises.'”

Mr. Clayton noted that, “Trump met Tuesday afternoon with several Midwest Republican lawmakers including Sens. Joni Ernst and Charles Grassley, both of Iowa, as well South Dakota Sen. John Thune, and Sen. Deb Fischer of Nebraska, as well as Rep. David Young whose district Trump was holding the rally in Tuesday evening.”

The DTN article also explained that, “EPA did not respond to questions about when the agency would initiate a rule proposal on year-round E15. Ethanol industry leaders said they think the announcement by EPA ‘could come in days or weeks.’ In the past, EPA has asserted in Federal Register rules on 15% blends that the agency did not have authority to waive the Reid vapor pressure requirement. Under current rules, retailers must not sell E15 from June 1 to Sept. 15 except for flex-fuel vehicles.

Coupled with year-round E15, EPA officials will also have to draft new rules making the market for Renewable Identification Numbers more transparent with some possible restrictions on who may hold RINs and how long a refinery company or others may hold onto RINs before putting them out on the marketplace. Those details also will need to be drafted in a federal rule.”

In a separate Bloomberg News article Tuesday, Jennifer A. Dlouhy and Mario Parker reported that, “U.S. Agriculture Secretary Sonny Perdue hailed Trump’s directive, calling it ‘an excellent way’ to take advantage of high corn productivity that will increase demand for the commodity. ‘This has been a years-long fight,’ Perdue said in an emailed statement, ‘and is another victory for our farm and rural economies.'”

“Trump Boosts High-Ethanol Gasoline as He Courts Iowa Farm Voters,” by Jennifer A Dlouhy and Mario Parker. Bloomberg News (October 9, 2018).

Dlouhy and Parker pointed out that, “Trump’s action may deliver a psychological boost to rural voters leading up to the November elections, but it won’t yield immediate dividends for E15.

The EPA will now spend months using a formal rulemaking process to finalize the shift on E15, which contains 15 percent ethanol and 85 percent gasoline. Even then, there may be years of additional uncertainty, as opponents vow to sue, arguing that the EPA doesn’t have legal authority to waive E15 from air pollution requirements without further action from Congress.”

“Analysts expect relatively modest gains in the short term but say there’s greater potential down the road, if the EPA rulemaking survives legal challenges,” the Bloomberg article said.

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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