Trump/EPA also to propose changes to RIN credits | Oil industry to battle in court
President Trump has endorsed pushing year-round use of E15 and views it as a way to expand biofuels and help farmers, according to a senior White House official. "The president has repeatedly stated his support for the [ethanol program]," a White House official told reporters Monday. "He thinks that it's good to have domestically produced energy here and he thinks it will be good for the agriculture industry as well as the economy overall."
“President Trump has made strengthening the Renewable Fuel Standard (RFS) an important priority of this administration," EPA spokesman John Konkus said in a statement, referring to the ethanol program by its formal name. "He is fulfilling his promise by providing clear policy direction that will expand opportunities for our nation’s farmers, provide certainty to our refiners and bolster the United States’ role as a biofuels powerhouse. EPA will follow the president’s direction and proceed as expeditiously as practicable.”
Trump, who cannot change the policy via executive order, has ordered acting EPA Administrator Andrew Wheeler to issue a waiver to the rules specifically for E15 to allow year-round sales.
While the coming directive will not require refineries to increase their blends, it could spur sales of ethanol. E15 is currently banned in summer months (June 1 to Sept. 15) due to smog concerns. Trump’s action would direct the EPA to allow E15 sales year-round and to commence the change for the 2019 summer driving season.
Impact. The waiver could give biofuel producers an opportunity to grow their share of the 143-billion-gallon gasoline market, now about 10%. Some analysts note the shift may mean another 14 million gallons (around 1%) of additional ethanol in the first year but add there is more potential ahead. Only about 1,430 of the nation’s 122,000 filling stations sell E15 now and there appears to be no funding mechanism to be announced in Trump's decision that would have dealt with E15 infrastructure hurdles like changing pumps and the installation of tanks at fueling stations.
There will be a rule-making process and court challenges could impact the timeline. The rule, which will have a public comment period, will be fast-tracked in order to be finalized before next summer’s driving season, a White House official said.
Trump also is proposing changes to a RIN credit program which allows oil refiners to buy and sell credits for using ethanol, the White House official said. Refiners purchase RINs — renewable identification numbers (RINs) — to show they are blending the required level of ethanol. Smaller refiners, which may not have blending capability, have complained about the cost of buying the credits. The White House said it will push for more transparency in the system and look to offset market speculators by limiting RINs to obligated parties — the move could block Wall Street banks from trading in credits. Various options are expected to be included in the call for public comments. For example, refiners would now have to prove compliance with the program quarterly rather than annually, and EPA is expected to limit how long companies other than refiners and importers can hold credits. Some independent refiners have complained that market speculation and manipulation drive wild swings in the value of those credits, with some traders abandoning sales after negotiating them and others placing fraudulent bids with the goal of inducing higher prices. The U.S. government has obtained more than 30 criminal convictions for biofuel fraud.
Year-round E15 opponents were quick to react. “Gasoline with more ethanol produces more smog, which can harm the health of people — especially children and the elderly. That’s why the Clean Air Act makes it illegal to sell generic E15 gasoline in the summer,” the National Wildlife Federation said in a statement Monday. There are concerns among gas station operators relative to liability for consumers misfueling vehicles with E15 that are not designed to use the higher ethanol blend.
"We just don’t think it rises to the significance of issuing the E15 waiver, and therefore it's no deal at all, from our standpoint," said Frank Macchiarola, vice president of downstream and operations for the American Petroleum Institute (API). "From a legal standpoint, we don’t think EPA has the authority to issue the E15 waiver, [and] we will aggressively be looking at all of our potential options moving forward with respect to challenging this decision." The API has been running TV ads, directly aimed at Trump, that argue E15 fuel can damage engines and fuel systems of certain vehicles and other equipment powered by gasoline. That point was amplified in a letter last week to Trump from a bipartisan group of 20 senators who cautioned against a “one-sided approach” to the ethanol-mandating RFS “that favors only one industry stakeholder.” Link to letter.
The ethanol industry, while supporting the Trump directive to EPA, remains upset over the oil industry benefiting from the more than two dozen waivers that former EPA Administrator Scott Pruitt granted to refineries that allowed them to ignore the RFS mandate that they blend the corn-based fuel with gasoline. “We’re very excited to hear the president’s upcoming announcement," Emily Skor, CEO of Growth Energy, an ethanol trade association, said in a statement. "He knows farmers are hurting and they want action on E15 in time for the next summer driving season. Year-round sales of E15 nationwide could deliver demand for two billion bushels of American corn and help restore growth in rural communities."
Trump’s action begins eliminating “this antiquated, red-tape-laden regulation,” said Geoff Cooper, head of the Renewable Fuels Association (RFA). “This is the right signal to the marketplace at just the right time, as both farmers and renewable fuel producers desperately need new market opportunities and sources of demand.”