President Trump campaigned as a champion of corn ethanol but, as a boon to the oil industry, he could put a cap on the price of credits, called RINs, that refiners must buy if they don’t blend enough ethanol and biodiesel into the U.S. fuel supply. The idea, which Iowa Sen. Chuck Grassley calls “a non-starter,” splits two blocs of Trump’s supporters, farmers and refinery workers.
“I’m very fearful and hope he will take a look at the alternatives. Anything is better than a RINs cap,” Grassley told reporters. Texas Sen. Ted Cruz says a cap would preserve blue-collar refinery jobs. A Philadelphia refinery says it went broke because of the high cost of buying the credits.
The administration is working at the interdepartmental level, a step below the White House, to find the most realistic options for changing biofuel policy, headlined by the Renewable Fuel Standard, which guarantees renewable fuels a share of the U.S. market. The White House would make a final decision from agency recommendations. Sources said a USDA-EPA session was scheduled for Tuesday to discuss biofuel policy.
“I don’t know if the president would make that choice,” said Agriculture Secretary Sonny Perdue when asked if a RIN price-cap appealed to Trump as a dramatic step. Perdue said he sought “a solution that doesn’t include a RINs cap.”
The price cap, benefiting the oil industry, has been presented as quid pro quo that would help farmers and ethanol makers by allowing year-round sales of a richer ethanol blend, E15, than traditional 10 percent blend. In the view of the ethanol industry, it’s a bad bargain, possibly destructive, because cheap RINs will remove the incentive to blend ethanol.
Yet, there is pressure on corn farmers to offer a concession of some sort. One farm leader said there wasn’t much that corn farmers could offer. The oil industry was part of a short-lived coalition that created the RFS but has fought for years to weaken or eliminate the requirement to sell a rival fuel. The bankruptcy of Philadelphia Energy Solutions gave RFS opponents a lever to demand action.
Grassley said he left a recent White House meeting “with the feeling the president doesn’t really understand the damage a cap on RINs will do.” A leading congressional advocate of ethanol, Grassley said a RINs cap was “a non-starter as far as I’m concerned” but he was ready to look at alternatives, particularly if they had industry support.
During a speech at a National Ag Day celebration, Perdue said year-round sales of E15 would lead to larger sales of ethanol and reduce the need for RINs. Farm groups and ethanol makers have the same view. Some farmers questioned Perdue’s commitment to biofuels early this month when he asked why farmers cared so much about RIN prices.
Ethanol production due to the RFS “provided a $14.1 billion boost in value of the U.S. farm sector in 2015 or $6,800 per American farm,” besides creating tens of thousands of rural jobs, said the trade group Renewable Fuels Association. The pro-ethanol group Growth Energy said, “The Renewable Fuel Standard has revitalized rural America” while calling for year-round sales of E15.