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EPA Issues Biofuel Mandate, Is Accused of Breaking a Deal on Ethanol

Ethanol makers say the waivers, given to more than two dozen refineries, reduce the market for ethanol by hundreds of millions of gallons.

Less than two weeks before the new year, the EPA said it modified the Renewable Fuel Standard to ensure that “a net of 15 billion gallons” of corn ethanol is blended into gasoline in 2020. Yet, ethanol makers and farm groups were skeptical that the EPA’s final version of the RFS, issued on Thursday, would do the job. The oil industry indicated it would sue EPA for going too far to appease the Farm Belt.

EPA administrator Andrew Wheeler said President Trump “committed to our nation’s farmers that our biofuel requirements would be expanded in 2020” and with the revamped RFS, “we are delivering on that promise.” Wheeler said EPA would compensate in the RFS for hardship exemptions given to small-volume refineries. “By proposing effectively 15.8 billion gallons for 2020, we will ensure meeting our target of 15 billion gallons,” he said.

Ethanol makers say the waivers, given to more than two dozen refineries, reduce the market for ethanol by hundreds of millions of gallons. Farm-state allies in Congress carried the issue to a meeting with President Trump in September and got an agreement that the statutory target for corn ethanol blending would be honored — “15 billion means 15 billion” gallons, as biofuel supporters phrased their goal.

“This (final rule) does not reflect what we agreed to in that meeting,” said Iowa Sen. Chuck Grassley, a leading advocate of biofuels. Ethanol trade groups said the EPA rule “fails to deliver” or “does not align” with their expectations from the White House meeting. The National Farmers Union said the EPA would make up for half of the volume “lost” to waivers — 770 million gallons instead of 1.34 billion gallons — and put the blame on Trump for “yet another promise he hasn’t kept.”

In its final rule, EPA said it would adjust the percentage of ethanol to be blended into gasoline to reflect the three-year average of Energy Department recommendations for refinery waivers. Farm groups and ethanol makers say the White House agreement was to use the actual waivers.

The National Corn Growers Association said the EPA formula “is an improvement over the status quo,” but vigilance was needed to assure that 15 billion gallons will be blended. The Renewable Fuels Association, an ethanol trade group, agreed that the formula “still does not guarantee” the 15 billion-gallon target.

“Neither the reallocations nor the partial waivers contained in today’s announcement are legal. Court challenges will ensue,” said the Fueling American Jobs Coalition of refiners, fuel retailers, and union workers. An official at the American Petroleum Institute, a trade group for the oil industry, said “we will vigorously challenge this policy in the weeks to come” and also seek repeal or reform of the RFS, reported The Hill newspaper.

The Trump administration’s handling of the RFS has generated more controversy in the Midwest, a potentially pivotal region in the 2020 presidential election, than has the China-U.S. trade war. The market for ethanol is constrained because of stagnant U.S. gasoline consumption.

“Whatever happens is up to Administrator Wheeler, and the president’s support among farmers is in his hands,” said Grassley, who says EPA too often strays from Trump’s directions. His view is common; Trump campaigned as a champion of ethanol and farm groups rely on him to intervene with EPA.

The ethanol industry and farm groups said they would monitor EPA handling in coming months of refinery waivers and action to expand the market for E15, a richer blend of ethanol than the traditional 10% blend into gasoline. Last spring, Trump announced removal of the summertime ban on sale of E15. Proponents say E15 could expand demand for ethanol and bolster prices for corn.

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