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Trump Administration Grants Small Refinery Biofuel Waivers, Stirring Ire from Sen. Grassley and Farm State Lawmakers

Earlier this month, the Environmental Protection Agency (EPA) granted 31 small refinery biofuel waivers for 2018, an action relating to the Renewable Fuel Standard (RFS) that has caused concern among farmers and some Midwestern lawmakers that demand for ethanol and other biofuels could be curtailed.  The RFS has been a source of conflict between the executive branch and legislative branch, and news that President Trump intervened in this month’s waiver decision has all but assured that clashes will continue.

Background- Some Key Points to Remember

As far back as December of 2016, when President Trump began making key nominations to his Cabinet, agricultural policy observers had expressed some measure of unease with the Administration’s support for biofuels, and the Renewable Fuel Standard (RFS).

With respect to the EPA, President Trump nominated Oklahoma Attorney General Scott Pruitt, who had “been an open critic of the RFS.” 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.”

Nonetheless, Pruitt became the EPA Administrator in February of 2017.

In the fall of 2017, farm state Senators, and in particular Iowa GOP lawmakers Chuck Grassley and Joni Ernst, successfully thwarted a proposal from the EPA to reduce the volume requirements for biodiesel for 2018 and 2019 under the RFS.  In late November of 2017, the EPA released its federal requirements that stuck closely to the current quotas for fuel.

Capehart, Tom, Liefert, Olga, Olson, David W., Feed Outlook, FDS-19h, U.S. Department of Agriculture, Economic Research Service, August 14, 2019

Meanwhile, in December of 2017, a meeting over the RFS was convened at the White House that included Administrator Pruitt, Agriculture Secretary Sonny Perdue, and over ten senators.

Bloomberg News reported at the time that, “President Donald Trump urged Republicans to settle their differences over the U.S. biofuel mandate at a White House meeting [on December 7, 2017] with Ted Cruz and other senators critical of the requirement for ethanol use, according to lawmakers who attended.”

“Several of the senators, led by Cruz, had requested the summit to discuss ‘a pathway forward’ on renewable fuels that will save refinery jobs they say are imperiled by high RIN prices.”

Sen. Cruz issued a statement at the time, noting that, “We had a productive meeting today with the President to discuss how to fix the RFS compliance problem in a way that protects both refinery workers and corn farmers. We look forward to working with our colleagues representing Midwest states to find a win-win solution.”

Then last year, in June of 2018, Reuters writers Jarrett Renshaw and Chris Prentice reported that, “U.S. President Donald Trump, in yielding to pressure from farming states and agreeing to suspend changes to U.S. biofuel policy is now being criticized by another important constituency, the main union for oil refinery workers.”

The article stated that, “Trump on [June 4, 2018] had told Midwestern lawmakers he would drop a proposed deal to tweak the [RFS] to cut costs to refineries, saying he understood the move would hurt farmers, sources familiar with the matter told Reuters.

“U.S. Senators Chuck Grassley and Joni Ernst from the farm state of Iowa, along with biofuels industry representatives in favor of the existing legislation praised Trump, and prices for U.S. renewable fuel credits soared more than 40 percent in morning trade.”

And in May of this year, the Associated Press reported that, “The Trump administration is following through on a plan to allow year-round sales of gasoline mixed with 15% ethanol, though some say the move is undercut by a policy that gives oil refineries waivers allowing them to use reduced levels of the additive.”

RFS- Small Refinery Exemptions Granted

With this brief background on the RFS in mind, Reuters writers Humeyra Pamuk and Jarrett Renshaw reported on August 9th that,

The U.S. Environmental Protection Agency (EPA) has granted 31 small refinery biofuel waivers for 2018 on Friday, infuriating the ethanol and corn producers who blamed the Trump administration for bailing out the oil industry when U.S. farmers were suffering due to trade tariffs and low prices.

“The waivers from the country’s biofuel laws were fewer than previous year’s and marked an increase in the number of petitions rejected, but the EPA’s decision was still unlikely to satisfy the powerful U.S. corn lobby which wants a broad retrenchment of the biofuel waiver program it blames for undercutting ethanol demand.”

Pamuk and Renshaw explained that, “Small Refinery Exemptions are available to small U.S. refineries that can prove they are in financial strife, and the waivers free them from their obligation under the [RFS] to blend biofuels like ethanol into their gasoline or purchase credits from others that do.

Since Trump took office, the EPA has more than quadrupled the number of waivers it has granted to refiners, saving the oil industry hundreds of millions of dollars, corn growers, who claim the move threatens ethanol demand. Refiners dismiss the argument.”

The Reuters article also pointed out that, “Trump’s EPA granted 35 of the 37 applications it received for the 2017 year, including for refineries owned by companies like Exxon Mobil and Chevron Corp, and billionaire investor Carl Icahn, vastly expanding the program.

“Both the oil and corn industries have been awaiting the 2018 decisions for months.

“Those decisions had been ready in June, industry sources told Reuters, but Trump intervened after a trip to Iowa where he heard angry feedback from farmers about the waiver program. He ordered members of his Cabinet to review the waiver program based on those complaints.”

More specifically, recall that back in June, The Wall Street Journal reported that, “Mr. Trump was surprised the expansion of ethanol sales year-round hadn’t satisfied farmers, according to the people familiar with the matter. After Air Force One returned from the Iowa trip, Mr. Trump directed EPA Administrator Andrew Wheeler and Agriculture Secretary Sonny Perdue to come up with a new plan, leaving the details to them, these people said.”

And in July, Bloomberg News reported that, “Donald Trump has cited his move to allow year-round sales of high-ethanol gasoline as farmers pressure him to dial back decisions to exempt oil refineries from biofuel-blending mandates, signaling the president sees the two issues as related.”

“Because of the squabbling among the EPA, USDA and Department of Energy, said one person briefed on the situation, the matter ultimately may have to be resolved by the president,” the Bloomberg article said.

Then on Friday, Reuters writer Humeyra Pamuk reported that,

A phone call from U.S. President Donald Trump last week ended a nearly two-month-long review of the nation’s biofuels program, three sources familiar with the matter said, with the White House siding in favor of oil refiners over corn growers.

Trump gave Andrew Wheeler, head of the U.S. Environmental Protection Agency, the green light for the regulator to announce it had granted 31 small refinery exemptions out of the 40 applications, saying he wanted the issue off his desk, the sources said.

“Trump’s call triggered a flurry of action within the EPA, leading up to a surprise Friday afternoon announcement, after weeks of negotiations between U.S. government agencies failed to make progress in addressing farmers’ concerns.”

The Reuters article stated that: “‘The president has heard from all sides and in the end he has had enough of it. He called Wheeler and gave him the green light,’ a source familiar with knowledge of the matter said.”

Also on Friday, Reuters writer Humeyra Pamuk reported that, “Iowa’s Republican Senator Chuck Grassley said the Trump administration’s Environmental Protection Agency has ‘screwed’ the U.S. ethanol industry and farmers by granting waivers to 31 small petroleum refineries, effectively exempting them from an obligation to use more ethanol in their products.”

“The powerful senator, who represents the largest ethanol-producing state in the country, told Iowa Public Television that low biofuel credit prices negated refiners’ complaints that they are suffering financial hardship and deserve waivers from complying with laws to encourage more biofuel use.”

On Twitter, Both Republican and Democrat lawmakers from farm states expressed similar sentiments of unhappiness with the Administration’s exemption decision:

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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