Ya Happy Now? Trump Administration reveals grand bargain on biofuels volumes, E15, small refinery waivers

In Washington, details of a grand bargain over US biofuels blending have been released by the US Environmental Protection Agency. 

The 4-Point Agreement

The Administration announced that the following actions will be undertaken by EPA and USDA.

1. RFS Integrity. In a forthcoming supplemental notice building off the recently proposed 2020 Renewable Volume Standards and the Biomass-Based Diesel Volume for 2021, EPA will propose and request public comment on expanding biofuel requirements beginning in 2020. EPA will seek comment on actions to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020, and that the volume obligation for biomass-based diesel is met. 

2.  Addressing Small Refinery Waivers. This will include accounting for relief expected to be provided for small refineries. EPA intends to take final action on this front later this year.In the most recent compliance year, EPA granted 31 small refinery exemptions.

3. Unblocking E15. Building on the President’s earlier decision to allow year-round sales of E15, EPA will initiate a rulemaking process to streamline labeling and remove other barriers to the sale of E15.EPA will continue to evaluate options for RIN market transparency and reform.

4. Higher blend infrastructure. USDA will seek opportunities through the budget process to consider infrastructure projects to facilitate higher biofuel blends.The Administration will continue to work to address ethanol and biodiesel trade issues.

The backstory

As we reported here in August, the renewable fuels industry and farmers erupted in stormy protest this summer when news arrived that 31 small refinery waivers had been granted by EPA.

And we reported that an EPA memo shows it granted 100% hardship waivers when DOE recommended only 50%

At the time, Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw.  said, “The Trump Administration’s approval of 31 refinery exemptions from the Renewable Fuel Standard is just devastating news for our industry,” “With this action, President Trump has destroyed over a billion gallons of biofuel demand and broken his promise to Iowa voters to protect the RFS. The vast majority of these exemptions are not justified under the law. Since this news began to leak this afternoon, RFS credit prices have freefallen to nearly zero, destroying much of the incentive to blend an incremental gallon of ethanol.”

Weeks of closed-door discussions drew lawmakers, industry associations and major producers to the table.

As New Energy America CEO Mike Carr noted, “The decision comes after the Administration faced enormous political pressure from lawmakers on both sides of the aisle to reverse the 31 small refinery waivers recently granted to oil companies who had reported billions of dollars in profit.”

The Glad Tidings

1. More forward Certainty. As American Coalition for Ethanol CEO Brian Jennings put it, “It’s good the President is directing EPA to account for future Small Refinery Exemptions (SREs) beginning in 2020 to ensure more than 15 billion gallons is blended under the RFS next year.”

2. Reliable Methodology. As RFA CEO Geoff Cooper put it, “By accurately accounting for lost gallons from this point forward based on a 3-year average of all exempted gallons, beginning with the 2020 biofuel targets, and breaking down regulatory and infrastructure barriers to higher biofuel blends, we will be able to realize the true potential of the opportunities President Trump opened by approving year-round sales of E15.”

The Unfinished Business

1. The Specifics. This is a plan with an awful lot of ‘EPA will take comments’ in it, so there are good reasons to wait and see how this deal plays out.

2. The Past. As ACE’s Jennings noted, “it’s bad that the Trump Administration is doing nothing to reallocate the more than 4 billion gallons of RFS blending obligations waived for refineries from the 2016, 2017 and 2018 compliance years. These 85 waivers combined with the trade war and weather-related disasters have taken a terrible economic toll on rural America. It’s unfortunate our only remaining remedy is our joint litigation in the DC Circuit Court. 

3. The Lost 500. We don’t know anything about the fate of 500 million gallons in supplemental demand ordered by the DC Circuit Court in a previous ruling. Exactly if and how that will be added to the RFS, no one is quite sure.

4. Biodiesel uncertainty. As Kurt Kovarik, NBB Vice President of Federal Affairs said, “While today’s proposal addresses the lost gallons from future exemptions, it does not provide for additional volumes of biomass-based diesel in 2021. 

Reaction from the stakeholders

ABFA President Michael McAdams

“The Advanced Biofuels Association (ABFA) has always maintained that it was unlawful for the Environmental Protection Agency to use small refinery exemptions (SREs) to lower the price of Renewable Identification Numbers under the Renewable Fuel Standard. ABFA appreciates the administration’s efforts to grant relief from the damaging impact of these waivers, which have caused significant economic harm to stakeholders throughout the biofuels industry. This is a step in the right direction, which will help to restore the market demand for these lower carbon fuels.”

EPA Administrator Andrew Wheeler

“President Trump’s leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our Nation’s farmers and providing greater energy security, “Today’s agreement is the latest in a series of steps we have taken to expand domestic energy production and improve the RFS program that will result in sustained biofuel production to help American farmers.”

USDA Secretary Sonny Perdue

“President Trump has once again demonstrated that he is a champion for our nation’s farmers and rural America. The President recognizes that American farmers are the most productive in the world, and he has found a way to pursue policy that promotes economic growth and supports our producers. Building on the success of the year-round E15 rule, this forward-looking agreement makes improvements to the RFS program that will better harness the production of our farmers and ensure America remains energy dominant.”

Senator Joni Ernst (IA)

“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.”

Senator Chuck Grassley (IA)

“President Trump listened to the concerns of farmers and biofuels producers and delivered on their behalf… The solution outlined by President Trump, Administrator Wheeler and Secretary Perdue is exactly how the RFS is meant to function according to the law as written by Congress… Maintaining the integrity of the RFS, repealing WOTUS and allowing year-round sales of E15 will all help American agriculture and the rural economy. These are promises made and promises kept by President Trump. President Trump has made clear that he is an ally of corn and soybean farmers as well as ethanol and biodiesel producers. He is fighting for the farmer. This announcement is great news for Iowa, the Midwest and the entire country.”

Senator Deb Fischer (NE)

“In my discussions with the president, I fought hard for a fair deal for Nebraska’s farmers and ethanol producers. I thank the president for following through on his commitment to rural America. Today’s announcement means more certainty for families, businesses, and communities across the Good Life.”

Governor Kim Reynolds (IA)

“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.” 

Governor Pete Ricketts (NE)

“Ensuring RVOs do not go below 15 billion gallons and expanding access to E15 will bolster the RFS and ethanol production at a critical time for our nation’s rural economy, which has been suffering from low commodity prices. Thank you to President Trump for taking these important steps for ethanol and our great farm families!”

Congressman Rodney Davis (IL-13)

“I want to thank the President for working with me to bring parity to farmers in my district, and the ethanol industry as a whole, by addressing the issue of small refinery exemptions. I recently introduced the bipartisan Small Refinery Exemption Fairness Act to address this issue and reobligate gallons lost to these exemptions, and I look forward to seeing the details of this plan that will put us on the right path forward.”

Congressman Mike Bost (IL-12)

“This announcement comes at a time when Illinois ethanol producers needed a big win. By maintaining the 15 billion gallon baseline and increasing access to E15, President Trump has shown he is working for American agriculture. Farmers across Illinois’ 12th District will be pleased with this announcement and the security it provides for the Renewable Fuel Standard.”

Iowa Secretary of Agriculture Mike Naig

“This is welcome news for Iowa’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.”

Emily Skor, CEO of Growth Energy

“It’s been a long process, but when the chips were down, President Trump delivered for farm families and biofuel producers. This is a victory for rural America, and we are grateful to our champions in Congress, USDA Secretary Perdue, and governors across the heartland who fought to put homegrown energy back on the market. We also thank President Trump for hearing the voices of farmers and biofuel producers and his commitment to finding a solution that will make an immediate difference for rural families.”

Geoff Cooper, CEO, Renewable Fuels Association

“We thank President Trump for hearing the concerns of ethanol producers, farmers and consumers across the country. The plan announced today takes a crucial step toward repairing the damage done by EPA’s small refinery waivers and re-establishes the RFS as a driver of growth in the production and use of low carbon renewable fuels. Once finalized and implemented, this plan will ensure EPA follows the law in setting annual biofuel blending obligations under the RFS. President Trump’s action today not only begins to restore integrity to the RFS, but also starts to revive hope for farmers and ethanol plant workers who have seen small refinery exemptions wreak havoc on their markets and destabilize their rural communities.” 

Stephanie Batchelor, vice president of BIO’s industrial & environmental section

“This proposal provides much-needed certainty to the Renewable Fuel Standard – a policy that biofuel producers rely on to drive investment in low carbon energy solutions that will address climate challenges, enhance energy security and support rural economies. We look forward to commenting on the proposal and will continue to engage with the EPA to advance policies that support sustainable fuels so that we can grow our economy and safeguard our planet.”

National Biodiesel Board CEO Donnell Rehagen

“We are grateful that President Trump is taking a huge step to restore integrity to the Renewable Fuel Standard. Biodiesel producers continue to be severely harmed by EPA’s misuse of small refinery exemptions. Nine producers from across the country – including in Pennsylvania, Michigan, Texas, Georgia and Iowa – have closed their doors or reduced operations and laid off more than 200 employees. Today’s announcement is a first step in reversing the loss of production and restoring those jobs. The biodiesel industry deeply appreciates the consistently strong advocacy of Agriculture Secretary Perdue and Iowa’s political leaders.”

Kevin Ross, President of the National Corn Growers Association

“We’re very grateful the President listened to our concerns and is upholding his commitments to put the RFS back on track. Corn farmers weren’t shy in telling the President that the impact of these waivers would lead to significant consequences for farmers, folks working at ethanol and biodiesel plants, and the countless other rural jobs that depend on this market. The President is finally telling the EPA that enough is enough, they must follow the law, and we appreciate that. NCGA is thankful to our elected Senators, Representatives, Governors and other state lawmakers who consistently pressed the Administration to find a real solution to the harm caused by refinery waivers. A special thanks to USDA Secretary Perdue who continues to be an outspoken advocate on this issue and for farmers. We stand ready to work with them to ensure these commitments are finalized.” 

Mike Carr, Executive Director of New Energy America

“Farmers may be willing to take another run at kicking the football, but they should be ready to have it pulled away again—they simply can’t blindly trust the Trump Administration on the RFS. We’re in this situation because the President broke his promise to heartland voters, and we’ve seen the EPA break his promise each of the 31 times they’ve given away waivers to the oil industry. This Administration has proved again and again that their reflexive support for Big Oil donors and opposition to anything that would move us closer to a clean energy economy wins out over even his strongest supporters in rural America. Unless every gallon waived by EPA is fully accounted for, this promise, like all the others, is empty  This issue is far from over, and the White House and EPA need to know that we will all be watching, and counting, every gallon.”

Farmers have remained loyal to the Administration over the last two years, believing that plummeting crop prices induced by the trade war with China, and the unprecedented issuance of SREs would give way to greater gain. However, recent polling indicates the President’s key base across rural America is becoming more attuned to the blatant favoritism of Big Oil at the expense of the renewable fuels industry. The President’s missteps and empty promises could make the difference in winning reelection come 2020. This is particularly true since many of his potential Democratic rivals in 2020 seem to have picked up on the political opportunity.

Johannes Escudero, CEO, Coalition for Renewable Natural Gas

“The Trump Administration announced today that they have reached agreement on a deal that will expand RFS biofuel requirements and account for volumes waived through small refiner exemptions (SREs). While the details of the deal are still pending release, the joint USDA/EPA statement provides hope of a resolution to months of market imbalance. We are encouraged by the progress and look forward to continued engagement with EPA, USDA and President Trump to ensure the 2020 RVO contains the common-sense reform and restoration of stability that will enable the continued growth of America’s renewable natural gas industry.”

Grant Kimberley, Iowa Biodiesel Board executive director

“We thank the president for listening to rural America and the biofuels industry in addressing the issue of small refinery exemptions in the Renewable Fuel Standard. It’s a significant move towards restoring the integrity of the program. Facing a fragile farm economy and with at least one Iowa biodiesel plant having closed its doors, the president’s commitment is welcome relief, and we urge the EPA to act swiftly and earnestly in carrying out his agenda.”

Jeff Broin, POET Chairman and CEO

“On behalf of all POET team members, we sincerely thank President Trump.  We’re grateful for his leadership and the relentless support from our champions, Senators Ernst, Grassley, Thune, Rounds, Fischer, Sasse and Governors Reynolds, Ricketts and Noem. This announcement is the result of unprecedented unity among agriculture and biofuels advocates, which allowed us to align on what was truly needed to address the economic crisis created by the EPA mismanagement of the RFS and overuse of SREs.  Our attention, and that of farmers across the country, now turns to EPA to do the right thing and follow the President’s clear directive as these policies are implemented.”