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Ethanol Outlook: Trump’s ‘Unmistakable Support’ for RFS

Twice on Tuesday, organizers of the Iowa Renewable Fuels Association’s annual summit played videos of presidential candidate Donald Trump voicing his support for ethanol and the Renewable Fuel Standard (RFS) that compels the oil industry to blend the biofuel with gasoline.

The meeting near Des Moines, Iowa, held next to the Prairie Meadows Casino, sought certainty that support in the new Trump administration isn’t a gamble.

As several speakers acknowledged, Trump is loading his cabinet with one-time ethanol foes. Former Texas Governor Rick Perry, tapped to head the Energy Department, sued the EPA for a waiver to reduce the blending mandate. Former Oklahoma Attorney General Scott Pruitt, who has also sued the EPA, will soon be in charge of running the RFS as EPA administrator. Trump has named billionaire investor Carl Icahn as an adviser. Icahn owns an oil refinery and is an outspoken critic of the RFS.

Bob Dinneen, president of the national Renewable Fuels Association, reminded the group that under the Obama administration, “We’ve had a president of the United States who would not say the words corn and ethanol together” and an EPA “that actually rolled back” the RFS. In spite of strong support from Agriculture Secretary Tom Vilsack, “the rest of the administration was keeping us stuck in neutral.”

Dinneen acknowledged concern among farmers and ethanol supporters about Trump's cabinet nominees, which also include a likely secretary of state, Rex Tillerson, who headed Exxon-Mobile.

“But take a step back. It is not the Perry administration. It is not the Pruitt administration. It is not even Rex Tillerson’s administration. It is Donald Trump’s administration, and they understand what the boss wants to do on this program. He has been unmistakable in his support of the program.”

Dinneen sees Trump’s America First emphasis as positive for ethanol’s struggles to get past trade barriers to U.S. biofuel exports imposed by the European Union, China, and others.

The Obama administration didn’t fight European barriers because it didn’t want to impede talks on a trade agreement with the European Union, Dinneen said.

“Having a president in place who will fight for us is going to be refreshing,” he said.

Dinneen sees ethanol gaining from any efforts by the Trump administration to streamline environmental regulations. The ethanol industry has been frustrated by complicated rules that stifle sales of E15 (gasoline with 15% ethanol blended in).

Still, challenges are ahead, a panel of lobbyists that included Dinneen said later in the day.

Jim Massey, a Washington lobbyist with experience on energy issues going back to the administration of Jimmy Carter, predicted that the House of Representatives is likely to pass a bill this year that would freeze blending of ethanol at about 10%.

Dinneen didn’t argue with that, but added that the House will be busy with high-profile issues, including the repeal and replacement of Obamacare. Any bill to weaken the RFS would likely die in the Senate. “We’ve got a pretty good firewall in the Senate,” Dinneen said.

Potential trade wars could also complicate efforts to expand the market for ethanol. Mexico is already a top market for U.S. corn exports, and as Mexico’s state-owned oil company, PEMEX, loses its monopoly on that nation’s gasoline market, ethanol is likely to be blended into gasoline there, said Mike Dwyer of the U.S. Grains Council. Dwyer said he believes Mexico could be in the top five export markets for ethanol in a few years. Dwyer didn’t address Trump’s recent challenges to trading partners such as China and Mexico.

Iowa Governor Terry Branstad did talk about one key market: China. Like other speakers at Tuesday’s summit, he cited President Trump’s strong support for ethanol, but he acknowledged that his future role as ambassador to China will be a challenge. In December, China announced a 30% tariff on ethanol imports, a change that likely had little to do with Trump and more to do with China’s desire to support its own ethanol industry. China was one of the top export destinations for ethanol in 2016, helping push U.S. exports of the fuel to a record 1.1 billion gallons last year.

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