President Trump sat down with oil and ethanol leaders for the second time this week without resolving a battle over the federal mandate to mix biofuels into gasoline and diesel fuel. Iowa Sen. Chuck Grassley later said that “an emerging solution appears to be year-round E15,” a richer blend of corn ethanol into gasoline than the traditional 10 percent mix.
Oil-state senators want to link EPA approval of year-round sales of E15 with a price cap on RINs, the credits refiners must buy if they do not mix enough fuel to meet the Renewable Fuel Standard’s targets. “We are making real progress, and with the president’s leadership, we can and will ultimately solve the problem,” said Sens. Ted Cruz of Texas and Pat Toomey of Pennsylvania, prominent advocates of a cap on RINs.
“The president has been clear in his support for farmers and energy workers,” said a White House official. “Today’s meeting is part of an ongoing effort to best understand the many differing views on this issue, and the president looks forward to continuing this conversation.”
The oil industry has blamed the recent bankruptcy of a Philadelphia refinery on the high price of RINs, and has used the bankruptcy to argue for changes to the RFS, such as controls on RIN prices. Cruz has suggested a maximum RIN price of 10 cents. Ethanol makers say the Philadelphia refinery was an isolated case of poor management in what is a widely profitable industry.
Led by Grassley, farm-state senators have adamantly rejected RIN caps as a step that would destroy ethanol. With cheap RINs, they say, refiners would have no reason to buy ethanol.
The “grand bargain” being promoted by Cruz — E15 sales year-round and a RIN price cap — would be “catastrophic” for the biofuels industry, said economist Scott Irwin of the University of Illinois. A 10-cent RIN would obliterate the market for biodiesel, he said, and while E10 sales would not be affected, “the cap would remove all incentives for blending higher ethanol blends.”
Conversely, year-round availability of E15 could nudge up ethanol consumption enough to meet the current RFS target of using 15 billion gallons of ethanol a year, which would reduce the need for RINs and drive the unit price down to a few cents. At present, the EPA bars the sale of E15 during the summer. A waiver of the seasonal restriction “might just do the trick,” wrote Irwin at the farmdoc Daily blog.
Ethanol trade groups said that their members had encouraged Trump to allow year-round sales of E15. “The president clearly understands that the path forward is to allow sales of E15 year-round, promote growth, and put more RINs on the market,” said Growth Energy, a trade group.
One person at the meeting told Reuters that Trump saw capping RIN prices and raising ethanol content in gasoline as a “potential breakthrough,” according to the wire service. It said there was rising concern at the White House that the RFS debate was splitting “two of Trump’s most important constituencies.” At one point in the hour-long meeting, reported Agri-Pulse, Trump suggested a two-year cap on RIN prices to go along with year-round sales of E15. Ethanol makers rejected the temporary RIN cap.
Trump swept the Republican-leaning rural vote, pivotal to winning the White House, by huge margins in 2016. He also carried Pennsylvania, an industrial and traditionally Democratic state.
“Both sides made their case, and the only agreement was to look at economic studies for impact. No decisions were made,” said Grassley in a statement. “An emerging decision seems to be year-round E15, which would drive down RIN prices.”