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President Donald Trump has ordered federal agencies to shift course on relieving some oil refineries of requirements to use biofuel such as corn-based ethanol.

Trump and top Cabinet leaders decided late Thursday that they wouldn't make changes to just-issued waivers that allow small refineries to ignore the mandates, but agreed to start boosting biofuel-blending quotas to make up for expected exemptions beginning in 2021. The outcome was described by four people familiar with the matter who asked not to be named before a formal announcement could be made.

The decision was reached after a flurry of White House meetings this week on the issue, which divides two of Trump's top political constituencies: rural Americans and the oil industry. With the move, Trump is largely siding with farmers, ethanol producers and political leaders in Iowa who have accused the president of turning his back on the industry.

But the administration's shift risks blow-back in Pennsylvania and other battleground states, where blue-collar refinery workers have held rallies to push for relief from U.S. biofuel quotas they say are too expensive. The largest coalition of U.S. building-trade unions on Thursday warned Trump that changing course on exemptions would betray the president's "campaign promise to protect every manufacturing job."

"President Trump is committed to ensuring our country not only continues to be the agricultural envy of the world, but also remains energy independent and secure," White House spokesman Judd Deere said.

Administration officials agreed to the broad contours of a renewable-fuel plan, including further moves to encourage the use of E15 gasoline containing 15% ethanol, beyond the 10% variety common across the U.S. E15 could be dispensed alongside conventional ethanol blends at filling stations, under the drafted changes.

Under the tentative plan, the Environmental Protection Agency also will give a 500 million-gallon boost to the amount of conventional renewable fuel, such as ethanol, that must be used in 2020. A separate quota for biodiesel, typically made from soybeans, would get a 250 million-gallon increase.

Additionally, the administration will enhance a program meant to expand U.S. fueling infrastructure and get more ethanol into the system. The EPA will adopt an Agriculture Department assessment of the greenhouse-gas emissions associated with renewable fuel, and will expand environmental credits encouraging automakers to produce "flex-fuel" vehicles that can run on high-ethanol gasoline.

IOWA BACKLASH

The EPA has drawn intense criticism for its Aug. 9 decision to exempt 31 refineries from 2018 biofuel-blending requirements. Although federal law authorizes the waivers for small refineries facing an economic hardship, the number of those exemptions has surged during the Trump administration, and biofuel producers say they are being handed out too freely.

The backlash has been most severe in Iowa, the nation's top producer of ethanol and the corn used in its manufacture. Ethanol refining accounts for about 40% of U.S. corn consumption. Iowa is also critical for Trump's re-election; the state twice voted for Barack Obama before voting to send Trump to the White House in 2016.

Trump's Democratic challengers have seized on the issue, with Joe Biden, who generally leads Democratic polls, accusing the president of lying to farmers and abandoning a campaign promise to "unleash ethanol."

Agriculture Secretary Sonny Perdue had urged the White House to rescind some of the recently issued waivers -- at least those for refineries tied to "big" oil companies -- according to a Tuesday memo obtained by Bloomberg.

EPA officials argued that would be illegal.

Instead, Trump directed the agency to increase biofuel quotas to make up for the exemptions, a so-called reallocation that essentially will boost the burden for larger refineries that are not eligible to win waivers. The EPA will start incorporating expected exemptions into annual biofuel quotas beginning with 2021.

Oil industry leaders blasted the tentative agreement Friday, saying it would do little for U.S. farmers while hurting domestic refiners.

"Reallocation would be a major hit to fuel manufacturers in Pennsylvania and Ohio -- and refinery workers across the country -- with zero benefit to ethanol," said Derrick Morgan, a senior vice president with the American Fuel and Petrochemical Manufacturers. "Those celebrating will ultimately be foreign biofuel producers whose biodiesel is being imported to help meet mandates."

'ARBITRARY' POLICY

The EPA typically sets each year's biofuel blending requirements by Nov. 30 of the preceding year, except for biodiesel quotas, which are set two years in advance. Under the U.S. Renewable Fuel Standard program, there's a specific mandate for biodiesel, but the soybean-based product also can be used to satisfy an implied 15 billion-gallon quota for conventional renewable fuel.

Frank Macchiarola, a vice president at the American Petroleum Institute, called the drafted plan a "rushed, arbitrary policy."

"We hope the administration walks back from the brink of a disastrous political decision that punishes American drivers," Macchiarola said. "Bad policy is bad politics."

Information for this article was contributed by Jennifer Jacobs of Bloomberg News.

Business on 08/24/2019

Print Headline: Trump orders boost in biofuel quotas

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