Nearly three months ago, President Trump told oil-state and farm-state senators to find a mutually acceptable resolution to their fight over the Renewable Fuel Standard — the requirement that oil refiners mix biofuel, usually corn-based ethanol, into gasoline and diesel. Now the squabble is back in the president’s hands with a familiar set of proposals on the table for a group of senators who found them unpalatable in the past.
Trump is expected to meet four Republican senators — Chuck Gassley and Joni Ernst of Iowa, Ted Cruz of Texas and Pat Toomey of Pennsylvania — today to discuss steps such as capping the price of credits, called RINs. Refiners receive the credits when they comply with the RFS, but when they fail to blend in the required amount of biofuel, they must buy RINS on the open market.
The oil industry has tried for years to eliminate or cut back sharply the RFS, but the so-called ethanol mandate is popular in farm country, where it is viewed as a home-grown fuel that creates domestic jobs and boosts grain prices. The mandate was created more than a decade ago to reduce U.S. reliance on imported oil.
Trump and the senators will also discuss allowing year-round sale of E15, a 15 percent blend of ethanol and gasoline, that the ethanol industry has long sought. At present, E15 cannot be sold during the summer.
Six major U.S. farm groups reminded Trump in a letter of “your steadfast support for the RFS since the early days of your campaign. Any action that seeks to weaken the RFS for the benefit of a handful of refiners will, by extension, be borne on the backs of our farmers.” The rural vote was pivotal to Trump’s 2016 victory. The campaign to change the RFS gained momentum with the bankruptcy of a Phildelphia refinery, which did not have the infrastructure to blend in ethanol and said it went broke because of the high cost of RINs.
Trump ate lunch with Agriculture Secretary Sonny Perdue, EPA administrator Scott Pruitt and Vice President Mike Pence on Monday with the RFS on the menu. Politico said Perdue and Pruitt would support a cap on RIN prices, year-round sale of E15, counting ethanol exports toward the target for ethanol consumption, and a measure to keep speculators out of the RIN market. The USDA declined to comment on the luncheon. Other reports pointed to a similar set of proposals for the meeting with the senators. The package has elements that Cruz has pursued for months as well as the farm-state goal of year-round E15.
“Refinery owners are circulating the same old wish list,” said Emily Skor, chief executive of the biofuels group Growth Energy. “Sen. Cruz’s plans only help a few wealthy investors…We’re going to focus on policies that help thousands of workers in states like Iowa, Michigan, Ohio and Wisconsin.” Trump won those Midwestern states as well as Pennsylvania. The biofuel tussle “is politically treacherous for the president because it divides two important political constituencies: Iowa farmers growing corn for ethanol and Pennsylvania laborers who work in that state’s four oil refineries,” said Bloomberg.
Grassley has said the RIN cap suggested by Cruz of 10 cents apiece would destroy the ethanol industry because RINs would be far cheaper than ethanol. Farm groups objected last fall to counting exports toward a mandate on domestic fuel usage. The oil industry has fought higher blends of ethanol for years. The industry proposed unsuccessfully last year that retailers rather than refiners should be responsible for compliance with the RFS.