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U.S. Biofuel Credits Slump Ahead of Trump Meeting with Senators -Traders

By Stephanie Kelly

NEW YORK, Sept 19 (Reuters) - U.S. biofuel blending credits fell sharply on Thursday ahead of a meeting between President Donald Trump and senators from oil states, who are opposed to his administration’s tentative plan to boost annual ethanol usage mandates, traders said.

Renewable fuel (D6) credits for 2019 fell more than 10%, trading at 22¢ apiece from 24.75¢ on Wednesday, traders said. In recent sessions, refiners including Valero Energy Corp have bid up the market, they said.

Trump put forward the plan after a flurry of meetings in recent days with biofuels and oil refining advocates where he tested ideas to compensate the corn industry, a crucial political constituency, for his administration’s decision in August to exempt 31 oil refineries from their blending requirements under the Renewable Fuel Standard.

That move was warmly welcomed by the oil industry but caused outrage in the Farm Belt, and farmers and ethanol producers had warned Trump that the decision could force them to pull their support for him in next year’s presidential election.

During Thursday’s meeting, senators including Republicans Ted Cruz from Texas and Pat Toomey from Pennsylvania were expected to make the case that Trump’s proposed plan could backfire by putting refineries out of business and killing jobs in key 2020 battleground states, one source familiar with the matter said.

The meetings reflect the difficulty Trump has had in appeasing both the oil and corn industries, which have clashed for years over U.S. biofuels policy.

Under the RFS, oil refineries must use billions of gallons of biofuels like ethanol in their gasoline – a regulation intended to help farmers and cut U.S. petroleum imports, but which the oil industry says costs them a fortune.

Small refining facilities of 75,000 barrels per day or less can secure waivers if they prove complying with the regulation would cause them disproportionate financial hardship, and Trump’s administration has handed them out at a much higher rate than under former President Barack Obama.

Corn farmers and ethanol producers say the Trump administration’s broad use of the refinery exemption program undermines demand for ethanol at a time the industry is already suffering from a loss of foreign markets due to the U.S. trade war with China. But the oil industry says the exemptions help ensure that small refiners stay in business and have no impact on the amount of ethanol they use.

Iowa Republican Senator Chuck Grassley, a biofuels advocate, tweeted at Trump on Thursday, saying that farmers were looking forward to good news on the ethanol-related package. (Reporting by Stephanie Kelly; editing by Marguerita Choy)

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