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Largest Ethanol Maker Closes Indiana Plant, Blames EPA Waivers

President Trump is feeling the heat.

At the same time the largest U.S. ethanol maker, POET, said it was forced to shut down an Indiana plant due to EPA “mismanagement” of the ethanol mandate, the chairman of the Senate Finance Committee said on Tuesday “farmers feel the government isn’t keeping its word” on biofuels.

But chairman Chuck Grassley warned there may not be enough support in Congress to overrule the EPA, which has exempted 31 refineries from complying with the mandate.

“Bringing up legislation might bury the RFS,” said Grassley, referring to the Renewable Fuel Standard (RFS), which guarantees biofuels a share of the U.S. gasoline market.

Grassley is from Iowa, the No. 1 state in corn and ethanol production. Corn ethanol was a Farm Belt darling for years as a homegrown fuel, but now is criticized by environmentalists and free-market conservatives.

Farm groups and ethanol makers say the EPA undermines the RFS when it issues “hardship” waivers that exempt small-volume refineries from requirements to mix ethanol into their gasoline or to buy credits if they fall short.

Trade group Renewable Fuels Association said last week that 13 ethanol plants have been shuttered – three permanently – “due in large part to the demand loss resulting from the administration’s abusive exploitation of the small refiner waivers.”

“Not only is the government not keeping its word but it also in a sense is screwing the farmer when we already have low prices for grain,” said Grassley during a telephone news conference. The seventh-term Republican senator was nearing the end of his annual circuit of town hall meetings in every county in the state. The Sino-U.S. trade war is an element of concern for the farm economy, he said, based on comments at the meetings. “Of course, ethanol adds to that.”

POET said it will idle production at its 92-million-gallon-a-year ethanol plant in Cloverdale, in central Indiana, “after which the plant will cease processing of over 30 million gallons of corn annually and hundreds of local jobs will be affected.”

“Unfortunately, the oil industry is manipulating the EPA and is now using the RFS to destroy demand for biofuels, reducing the price of commodities and gutting rural economies in the process,” said POET chief executive Jeff Broin. Based in Sioux Falls, South Dakota, POET has reduced production at half of its 28 refineries in seven states and will reduce corn processing by 100 million bushels.

Two new petitions were filed by refiners following the EPA approval on August 9 of 31 small-refinery waivers. The waivers retroactively affect 1.43 billion gallons of biofuel obligations. The Trump administration has granted four or five times as many waivers annually as did the Obama administration. The oil industry says biofuel credits were unduly expensive in recent years and the RFS plainly allows waivers during times of hardship.

President Trump ordered cabinet members to soothe Farm Belt anger over the waivers, reported Reuters. “It remained unclear what actions Trump would be able to take to appease farmers upset that he had granted the waivers.” Nonetheless, ethanol credits rose in price by a penny, to 13.5¢ each, following the wire service story.

Nearly 40% of the annual U.S. corn crop is used in making ethanol and co-products such as distillers’ grains, used as a livestock feed. POET says it buys 5% of the U.S. crop when its plants are running at full capacity of 1.71 billion gallons a year.

ADM is the second-largest ethanol producer with operating capacity that is a hair behind POET.

The dozens of U.S. ethanol plants produced nearly 16.1 billion gallons last year and exported 1.7 billion gallons of it. The RFS for corn ethanol was 15 billion gallons in 2018.

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