Trump caught between farm, oil lobbies in ethanol fight
by Juliette MICHEL
On one side sit Midwestern farmers who grow the corn used to make ethanol. On the other are petroleum refiners who complain about excess costs from renewable fuel mandates.
US senators representing the two sides — which are also among President Donald Trump’s core constituencies — met Tuesday at the White House in the latest attempt to try to hash out a compromise.
At the heart of the controversy is a 2007 mandate on refiners to utilize an increasing share of corn-based ethanol mixed with fuel. Refiners also may fulfill requirements under the Renewable Fuel Standards by purchasing credits known as renewable identification number (RIN).
But consumption of ethanol has not risen as much as policy makers expected, due in part to reduced gasoline use after the 2008 financial crisis and the increased fuel efficiency in cars.
And refiners are reluctant to increase ethanol levels above about a 10 percent level in gasoline because there are few fueling stations in the US equipped for 15 percent or higher and many cars cannot run on the fuel.
As a result, prices of RIN credits have spiked at times, going above $1 a gallon in 2013 as compared with a few cents at the outset of the program. RIN prices today are around 30 cents.
“RIN prices have long been low enough that it flew under the radar with oil refineries,” said Christopher Knittel, a professor of economics at the Massachusetts Institute of Technology. “But the stakes are much larger now than ever before.”
Refiner Philadelphia Energy Solutions cited swelling costs of RIN credits earlier this year when it filed for bankruptcy protection.
But Knittel said it is unlikely higher RIN prices could cause a refiner bankruptcy, since academic research shows they are passed through to wholesale gasoline prices and that ultimately consumers pay for it.
Republican Senator Ted Cruz of Texas, an oil industry ally, wants the Trump administration to cap the price of RIN credits.
“It doesn’t make any sense at all to be bankrupting US companies … because of a broken regulatory system,” Cruz said. “I believe President Trump is going to do the right thing.”
– Challenges for farmers too –
But Trump also promised during his presidential campaign to look out for farmers, including corn growers in Iowa, a key state in US politics and home to Republican Senator Chuck Grassley, who attended Tuesday’s meeting.
US farmers have challenges of their own, with US government forecasters projecting 2018 farm incomes will hit a 12-year low and growers fearful that trade tensions between US and China could undermine agriculture exports.
Farm-state lawmakers are unhappy with the Environmental Protection Agency, criticizing chief Scott Pruitt for granting too many renewable fuel exemptions to small refiners.
In April, Grassley and four other farm-state lawmakers accused Pruitt of pursuing a “backdoor” campaign to “destroy” the ethanol mandate program.
“The problem with these secret waivers is that we have no way of knowing the justification,” they said. “EPA is hiding behind poor excuses about proprietary business information to shield big oil companies from public scrutiny.”
As expected, Tuesday’s meeting focused in part on a Trump administration plan to authorize the sale of gasoline with 15 percent ethanol (E15) all year. The fuel is currently barred in some parts of the country in the summer.
Cruz on Twitter described a “terrific final decision” from the meeting as a “win win” for both sides. The deal included a measure sought by the oil industry to count some ethanol exports towards targets, he said.
But Grassley was more circumspect, saying he needs to see the specifics being developed by Pruitt and Agriculture Secretary Sonny Perdue, both of whom attended the meeting, along with Trump.
Grassley praised the decision on E15 and an agreement to not pursue an “artificial cap” on RIN prices
“I told the President and Administrator Pruitt that EPA’s ‘hardship’ waivers for billionaires are hurting biofuels,” Grassley said.
“I look forward to reviewing a plan being developed by Secretary Perdue and Administrator Pruitt,” Grassley said, but added: “Any fix can’t hurt domestic biofuels production.”
© Agence France-Presse