Oil and Renewable Industries Locked in Tug of War over Trump's Ethanol Plan

by John Siciliano and Josh Siegel (Washington Examiner) The deadline for comments on the Environmental Protection Agency’s proposed plan to allow year-round sales of 15% ethanol fuel closes at midnight, but neither side in the fight — that is, the oil and renewable fuel industries — wants the plan to move ahead as drafted.

E15 fuel is restricted for use during the summer months because of its high vapor pressure, which can exacerbate smog levels. But the summer months are the largest season for fuel sales, and a prime opportunity for corn farmers to sell more of their product into the gasoline supply.

President Trump had negotiated the plan as part of his promise to Iowa farmers to expand the market for corn ethanol, while also trying to reduce costs for fuel makers and refiners.

The oil industry says to scrap the plan: The American Petroleum Institute plans to lay out a case that the plan is both illegal and unnecessary, threatening to sue if the EPA moves forward with the plan under its expedited schedule of Memorial Day.

The EPA’s plan, beyond waiving the restrictions for E15, also adds a layer of regulation to govern the sale and trading of ethanol credits that oil refiners must purchase to comply with the EPA’s flagship renewable fuel program, called the Renewable Fuel Standard.

The RFS requires billions of gallons of ethanol and other biofuels to be blended in the nation’s fuel supply on an ever-increasing basis each year.

The oil industry says the credit reforms, which could raise costs for fuel producers and consumers, are completely unnecessary, despite the reforms being designed to help refiners cut costs in buying ethanol each year.

Renewable fuel industry also opposes the market reforms: Most biofuel groups plan to support the part of the plan that expands the sale of E15 year-round, but will oppose the credit trading part of EPA’s plan.

“We support EPA’s actions to enable the growth of the biofuel industry by allowing year-round sales of E15,” said Paul Winters, spokesman for the biodiesel industry’s National Biodiesel Board. “However, the proposed … market reforms are unnecessary.”

EPA has not provided evidence that the part of the credit market it is trying to fix is actually broken, Winters tells John.

The ethanol credit reforms in the plan are aimed at stopping market manipulation, which has been blamed by some in the refinery industry for increasing the price of the credits.

But reforming a system with “no evidence” of manipulation could “disrupt and even undermine” the value of the credits that refiners use to meet the renewable fuel program’s annual requirements, Winters said.

His group produces biofuels that benefit from the credit market remaining untouched. The renewable fuel sector, in general, sees the problems in the market as perpetuated by large oil companies hoarding credits to raise prices to benefit from selling them to smaller, independent refiners that make up the bulk of the sector.

Frank Macchiarola, API’s downstream director, called the market reform piece of the ethanol plan a solution in search of problem in summarizing the oil group’s comments to reporters last week.

Brian Jennings, president and CEO of the American Ethanol Coalition, a pro-ethanol group based in Iowa, told John that the industry’s comments will support the E15 provisions with some slight recommended changes in how EPA does it, while asking the administration to completely “reject” the market reforms. READ MORE