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Senator Cornyn trying to get Big Corn behind U.S. biofuels reform

By Jarrett Renshaw and Richard Valdmanis

Dec 20 (Reuters) - Senator John Cornyn, the No. 2 Senate
Republican, is trying to win support from the Midwest corn lobby
for a broad legislative overhaul of the nation's biofuels
policy, according to sources familiar with the matter.

The effort comes as President Donald Trump's White House
mediates talks between the rival oil and corn industries over
the Renewable Fuel Standard, which requires oil refiners to
blend increasing amounts of corn-based ethanol and other
biofuels in the nation's fuel supply every year.

Oil refiners say the regulation costs them hundreds of
millions of dollars a year and is threatening to put a handful
of the nation's refineries out of business. Ethanol interests
have so far refused to budge on proposals to change it.

Cornyn "is working hard to unify all stakeholders in a
consensus effort to reform the Renewable Fuel Standard," an aide
to the senator told Reuters. The aide, who asked not to be
named, did not provide details.

Cornyn, of Texas, the U.S. state that is home to the most
oil refineries, is part of the Senate's leadership team,
responsible for securing the votes needed to pass the Republican
party's legislative agenda.

Two lobbyists for the oil refining industry said Cornyn was
having some success cobbling together a coalition of lawmakers
and stakeholders around a potential RFS reform bill that could
be dropped early next year. However, similar efforts to unify
these rival factions have fallen flat in the past.

Any such effort would need the buy-in of legislative backers
of the ethanol industry, like Republican Senators Chuck Grassley
and Joni Ernst of Iowa, the top-producing state for corn.
Officials for the senators did not respond to repeated requests
for comment.

Both Grassley and Ernst have previously repeatedly expressed
their intention to defend the RFS in its current form.

The White House has been hosting negotiations between both
sides of the issue over short-term remedies that can provide
relief to refiners struggling with the existing regulation. The
refining industry says compliance now costs it hundreds of
millions of dollars a year, and threatens to put some refineries
out of business.

Refineries that do not have adequate facilities to blend
ethanol into their gasoline must purchase blending credits,
called RINS, from rivals that do. RIN prices have risen in
recent years as the amount of biofuels required under the RFS
has increased.

Refineries that buy RINs include Philadelphia Energy
Solutions and Monroe Energy, both of Pennsylvania, and Valero
Energy Corp of Texas.

Valero said RINs cost it around $750 million last year,
though there are competing arguments over whether refiners pass
along those costs.

Senator Ted Cruz, also of Texas, last week sent a proposal
to the White House to cap the price of RINs at 10 cents each, a
fraction of the current price. The proposal was widely rejected
by the ethanol industry.

The ethanol industry has said in the past that placing caps
on the credits was a non-starter, and has instead argued for
policies to increase volumes of ethanol in the U.S gasoline
supply. The industry claims this would boost supplies of the
credits, lowering their prices.

Prices of renewable fuel credits have fallen in recent weeks
on reports of the discussions in Washington. The price hit 68
cents on Wednesday, nearing a seven-month low, according to
traders and Oil Price Information Services.

The White House has not yet commented on Cruz's proposal.

The RFS was introduced by former President George W. Bush as
a way to boost U.S. agriculture, slash energy imports and cut
emissions. It has since fostered a market for ethanol amounting
to 15 billion gallons a year.

The refining industry has pressed the Trump administration
repeatedly to adopt reforms that would lower the credit costs or
otherwise ease the burden on refineries, but the ethanol
industry has successfully defeated those efforts so far.
(Writing by Richard Valdmanis; Editing by Leslie Adler)

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