May 8, 2018, by Jarret Renshaw
NEW YORK (Reuters) – U.S. President Donald Trump told a group of senators on Tuesday he is considering allowing exported ethanol to count toward the volumes mandated under the nation’s biofuels law, a move intended to appease both Big Oil and Big Corn by cutting the refiners’ regulatory costs while preserving demand for corn.
According to two sources briefed on Trump’s meeting with the Republican senators, Trump also reiterated his support for expanding sales of higher ethanol blends of gasoline, and backed away from a proposal to cap the price of credits called RINs that refiners must acquire and turn into the government each year to prove compliance with the biofuels quotas.
The proposed changes follow months of fractious negotiations between Big Corn and Big Oil over the future of the U.S. Renewable Fuel Standard (RFS) that requires biofuels to be added to gasoline and diesel, after refiners increasingly complained the regulation was costing them a fortune.
The ethanol industry criticized the export plan.
“Offering RIN credits, which are supposed to be derived from a domestic renewable fuel use, for ethanol exports would threaten trade markets and impact corn farmers’ economic livelihoods,” said Kevin Skunes, president of the National Corn Growers Association.
Republican Senator Ted Cruz of Texas, who attended the meeting, declared the plan a victory for both the refining industry and for corn growers.
“More corn will be sold (good for farmers), plus lower RINs (saves blue-collar refinery jobs), plus more ethanol exports (good for America),” Cruz wrote on Twitter.
Republican Senator Chuck Grassley of Iowa, who also attended the meeting, applauded the move to expand the use of higher ethanol blends of gasoline but expressed caution over the export plan. “Devil in details,” he wrote.
Republicans Joni Ernst of Iowa and Pat Toomey of Pennsylvania also attended the meeting.
Sources said the export plan emerged from discussions on Tuesday about the Trump administration’s expanded use of hardship waivers that free small refineries from their obligations under the RFS. Industry experts say the waivers provided by Trump’s EPA have taken a big chunk out the 15 billion ethanol credit market.
Senators concerned about the use of waivers wanted to know how the administration planned on making up, or reallocating, the lost credits, and the plan to attach RINs to exports was offered as a solution, the sources said.
Agriculture Secretary Sonny Perdue and EPA head Scott Pruitt are expected to work out the details on the export plan.
A proposal to allow exported ethanol and other biofuels to generate the tradable RINs credits under the RFS was floated by the Trump administration last year to help lower RIN costs to refiners, but was quickly shot down by the powerful corn lobby.
The oil industry, meanwhile, has also expressed opposition to expanding the sale of gasoline containing 15 percent ethanol, known as E15, mainly on the grounds that it cuts into petroleum’s share of the fuel market.
The RFS is intended to help farmers, reduce air pollution, and cut petroleum imports. But some merchant refiners, like PBF Energy and Valero Energy Corp, say it costs them hundreds of millions of dollars annually.
The Trump administration waded into the issue late last year after fielding complaints from the refining sector, and hosted a series of meetings with lawmakers and company executives representing both sides.
Both the corn lobby and the merchant refining industry have said a misstep could threaten the same blue-collar jobs Trump has vowed to support.
But pressure to rein in regulatory costs has also softened in recent weeks as the price of compliance credits have hit five-year lows of around 30 cents. Those declines were driven mainly by news the EPA had granted more than two dozen hardship exemptions from the RFS to small refineries that say compliance would have been too financially difficult.
In the past, the EPA has tended to give out less than ten such waivers annually, according to former officials.
The expansion of the small refinery waiver program is due in part to a federal court decision last year that said the EPA had been too stingy with the exemptions in the past. But biofuel groups say the EPA is using the cover of the court to gut the RFS.
Reporting By Jarrett Renshaw, Editing by Rosalba O’Brien and Marguerita Choy