Trump administration says plan would restore ethanol demand

President Donald Trump - AP image

The Trump administration announced Friday it plans to implement new rules that will increase demand for ethanol, reversing a decline caused by exemptions given to oil refineries.

Posted: Oct 4, 2019 9:45 AM
Updated: Oct 4, 2019 1:25 PM

DES MOINES, Iowa (AP) — The Trump administration announced Friday it plans to implement new rules that will increase demand for ethanol, reversing a decline caused by exemptions given to oil refineries.

The proposal follows months of complaints by Midwest farmers, politicians and the ethanol industry that the federal government's granting of waivers to refiners had violated federal law and forced some ethanol plants to close.

Roughly 40 percent of U.S. corn is used to produce ethanol, so declining demand for the fuel additive can depress prices for the grain. The issue carries extra political weight because the ethanol industry is concentrated in Iowa, Nebraska and other Midwest states, where farmers have been among President Donald Trump's most loyal supporters.

Although the proposal by the Environmental Protection Agency and Department of Agriculture wouldn't address the current loss of ethanol demand, it would ensure that beginning in 2020 the government would comply with a 15-billion-gallon standard already required under federal law and meet benchmarks for soybean-based biofuels. The EPA also said it would remove barriers to the sale of E15, a higher blend of ethanol that because of Trump's support now can be sold year-round.

The EPA said it will seek comments on its plan in the coming weeks and expects to take final action later this year.

Harold Wolle, who grows corn and soybean in south-central Minnesota, said he welcomed the agreement but said the Trump administration was simply agreeing to comply with federal law.

"I'm please by their willingness to abide by the law," said Wolle, who farms near St. James, Minnesota. "It's good news but they aren't going out of their way to do anything for agriculture or the ethanol industry."

The deal should mean farmers will have one less issue to deal with, said Wolle, but they still face the prospect of a late harvest due to historically wet weather and poor prices because of trade disputes.

Republican state and congressional leaders responded more enthusiastically, thanking Trump for taking action that offsets the EPA's earlier move to grant waivers to 31 refineries this year that reduced ethanol demand.

U.S. Sen. Chuck Grassley of Iowa, who during the summer said farmers had been "screwed" by the EPA, issued a statement Monday that praised the president and emphasized the important of ethanol to agriculture and the rural economy.

"This plan will fix EPA's exemption process and help farmers and biofuels producers going forward," Grassley said.

The Iowa Renewable Fuels Association also thanked Trump for "listening to their concerns and calls for the Renewable Fuel Standard to be enforced according to the law."

The U.S. oil industry criticized the proposed new rules.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers said in a statement, "We are deeply concerned about the administration's decision to, once again, play politics with our fuel system by increasing an already onerous biofuel mandate, placing greater strain on the U.S. manufacturers he promised to protect and threatening higher costs for consumers."

Although the refinery waivers have been blamed for spurring the closure of several ethanol plants, Iowa State University economist Dave Swenson said the industry still may struggle because demand for the fuel in the last few years hasn't kept pace with the increased supply.

"The industry has been in trouble for a relatively long time," Swenson said.

Iowa Governor Kim Reynolds issued the following statement on the President's biofuels deal:

“A robust renewable fuel standard is critical to a healthy ag economy in Iowa and across the nation. We are grateful to President Trump for honoring the federal statute to blend 15 billion gallons of ethanol annually, and allowing existing E10 pumps to deliver E15 fuel, helping drive domestic demand for biofuels. By protecting the RFS, President Trump demonstrated his commitment to rural America and the American farmer."

“Today’s announcement is a reflection of the strong, united front from the renewable fuels industry as well as strong leadership from Senators Chuck Grassley and Joni Ernst. The President clearly heard us when we said 15 billion gallons means 15 billion gallons, and this deal proves it."

“We will never stop fighting for the renewable fuels industry because of its central role in our economy and we appreciate President Trump’s willingness to listen and work with this industry. It is clear, this President remains committed to America’s farmers.”

Senator Joni Ernst (R-Iowa) also applauded President Trump's decision:

“This is great news for Iowa and rural America. President Trump is following through on his commitment to our nation’s hardworking farmers and biofuels producers."

“The RFS is essential to the livelihoods of folks across our state, which is why I’ve been fighting tirelessly on behalf of Iowa’s farmers and producers every step of the way and making Iowans’ voices heard throughout this process. Our message was clear: uphold the RFS—15 billion means 15 billion. "

“The president heard that message and has acted on it. The steps outlined today by the administration will help increase demand for our biofuels, provide certainty for farmers and producers for years to come, and ensure that EPA is implementing the RFS as it was written.”

Iowa Corn Growers Association President Jim Greif issued the following statement on the RFS annoucement:

"Iowa corn farmers received positive news today for momentum in the right direction to uphold the integrity of the Renewable Fuel Standard. The Iowa Corn Growers Association( ICGA) thanks President Trump for his commitment to address the demand destruction of corn ethanol brought on by expanded use of small refinery exemptions and prospectively account for those exemptions using a three-year rolling average of actual waived gallons, beginning with the 2020 biofuel standard. This gives hope to Iowa’s rural economy, especially at a time when corn farmers need it most."

"We also want to thank Iowa’s elected leaders and Iowa Corn Growers Association members who overwhelmingly responded to communicate with the President the top priority of ICGA -- to retain the RFS and reduce regulatory barriers for higher blends of ethanol. We are grateful for the dedication of our biofuels champions, Senators Ernst and Grassley along with Governor Reynolds, who fought for Iowa’s corn farmers, ethanol plants and rural communities."

"We appreciate the Trump Administration is taking steps to make it right to help Iowa corn farmers. ICGA will continue to work with our elected champions and the Administration to ensure the commitments made today are implemented and demand for Iowa corn is restored."

Iowa Secretary of Agriculture Mike Naig called Friday's developments "welcome news" for the state's farmers and the renewable fuels industry:

“President Trump listened to our producers’ concerns and took action to address them. This is what happens when farmers, biofuels producers and government leaders work together to make our voices heard. We are grateful to President Trump for directing EPA to uphold the intent of the Renewable Fuel Standard, and we look forward to working with EPA and USDA to implement today’s announcement. As the number one producer of ethanol and biodiesel in the country, Iowa is proud to lead the nation in reducing our dependence on foreign oil. We will continue to work to restore and build demand for these critical markets for Iowa agriculture.”

Iowa Renewable Fuels Association Executive Director Monte also issued the following statement:

“Iowans thank President Trump for again listening to their concerns and calls for the Renewable Fuel Standard (RFS) to be enforced according to the law. The economic devastation wrought by the unjustified use of refinery exemptions must be stopped. We welcome the proposal to restore integrity to the RFS by prospectively accounting for those exemptions using a three-year rolling average of actual refinery exemptions granted. We will work with our champions and the White House to make sure the EPA’s final rules ensure that a 15 billion-gallon RFS will actually be a 15 billion-gallon RFS. If that is accomplished, the integrity of the RFS will have been restored and President Trump’s promise to protect and uphold the RFS will have been redeemed."

“None of this would have been possible without the steadfast support and hard work of our elected champions. We are deeply appreciative of all Sens. Ernst and Grassley and Gov. Reynolds did to bring about this positive proposal today."

“With the process toward RFS integrity begun, IRFA will also continue to work on expanding biofuels requirements, specifically the advanced level in 2020 and the biomass-based diesel level in 2021, as well as restoring the 500 million gallons of conventional biofuels that were illegally waived by the Obama Administration in 2016, and which the D.C. Circuit Court of Appeals has already ordered the EPA to put back in the RFS program.”

Not everyone was pleased with President Trump's RFA deal.  Presidential candidate and U.S. Senator Amy Klobuchar (DFL-MN) made this comment:

"President Trump does not get credit for offering a vague promise to try to undo the damage his administration has done to the biofuels industry and rural economies across the Midwest. Even if the president could be counted on to follow through on this promise, I believe it will end up being far too little, far too late."

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