President Opens up E15 Sales: Trump Directs EPA to Allow Year-Round E15 and a More Transparent RINs Market

October 09, 2018

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by Chris Clayton and Todd Neeley (DTN The Progressive Farmer) Leading into President Donald Trump's trip to Council Bluffs, Iowa, on Tuesday, a senior White House official said Tuesday that the president has directed the Environmental Protection Agency to create a new rule allowing year-round sales of 15% ethanol blends.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said Monday that he didn't want to "count my chickens" until he sees EPA post a rule notice in the Federal Register, but Shaw noted anything that can increase demand for ethanol and corn right now is good news.

"It's hard to find the right adjective to express being on the cusp of getting something that really there was no legitimate argument against, but you fought for seven years to try to get it done," Shaw said. "It's going to be a short-term morale boost for the industry and a long-term market boost."

The rule, which White House officials expect would be completed by next summer, would reflect a significant win for the ethanol industry with expectations that more fuel stations would be willing to carry E15 if they could sell it without having to stop for the summer. EPA will oversee the timeline for drafting and finalizing a rule, but a senior White House official said, "the goal would be to get the rule finalized in time for the summer driving season next year."

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EPA approved E15 for use in all 2001 and later model cars and pickups, which accounts for 90% of the vehicles on the road, according to the Renewable Fuels Association. Still, the American Petroleum Institute has been waging a campaign against the fuel, arguing "three out of four vehicles on the road were not designed for E15."

RFA said there hasn't been a single reported case of engine damage or consumer misfueling as a result of the higher ethanol blend in the seven years since E15 was approved. In addition, an EPA waiver on the Reid vapor pressure, or RVP, requirement is not a mandate to sell or use E15. It simply expands the availability at local gas stations.

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Currently, E15 is offered by several major retailers, including Sheetz, Cenex, Kum and Go, Murphy USA, Kwik Trip, RaceTrac, Thornton's and QuickTrip. However, some retailers remain hesitant to invest in the infrastructure to distribute E15 since it cannot be sold year-round. Green Plains Inc. Chief Executive Officer Todd Becker told DTN in a recent interview that if EPA grants an E15 waiver at least 10,000 more stations would offer the fuel.

The average E15 price as reported by e85prices.com on Monday, was $2.77. The prices is lower than both unleaded gasoline, which averaged $3.33 a gallon nationally and E10, which averaged $2.85 on Monday. READ MORE

Trump Said to Embrace Reform of Opaque Biofuel Credit Market (Bloomberg)

In boon for farmers, Trump lifting restrictions on ethanol (Miami Herald)

E15 Announcement Expected Today (Energy.AgWired.com; includes AUDIO)

Ethanol Blog: Lawmakers Push Trump to Approve E15 (DTN The Progressive Farmer)

Public Pulse: Hopes for E15 boost (Omaha World-Herald)

Trump unveils new plan to pump up ethanol (Washington Examiner)

Current-year US biodiesel RINs reach lowest level since 2014 (S&P Global Platts)

Trump will order changes in biofuel rules in bid to end feud between farm states and oil refiners (CNBC)

White House announces plan to expand ethanol use linked to increased pollution (The Hill)

RFA Applauds President Trump’s E15 Announcement (Southeast AgNet Radio Network/Renewable Fuels Association)

API URGES TRUMP ADMINISTRATION TO ABANDON ANTI-CONSUMER E15 POLICY (American Petroleum Institute; includes VIDEO)

E15 Announcement The First Step in A Long Road (Urban Air Initiative)

EPA expected to begin rulemaking process to allow year-round E15 (Ethanol Producer Magazine)

TRUMP ON E15: (Politico's Morning Energy)

Renewable fuels industry (mostly) applauds Trump move on year-round E15 (Biofuels Digest)

Oil industry, green groups join to oppose Trump’s ethanol plan (The Hill)

Trump Doubles Down on Ethanol, Ignoring Clean Air Act and Public Health (Sierra Club)

The Energy 202: Iowans were hit hard by tariffs. Trump's new ethanol policy may help Republicans in the midterms. (Washington Post)

STATEMENT BY AFPM PRESIDENT AND CEO CHET THOMPSON (American Fuel and Petrochemical Manufacturers)

Oil refiners threaten to sue Trump over ethanol (Washington Examiner)

DOC OF THE DAY: (Politico's Morning Energy)

Senator Ernst warns oil industry will fight E15 progress (Radio Iowa)

AgriTalk - Geoff Cooper - October 11, 2018 (AgriTalk AUDIO)

WIBW Radio/KAN Podcast: RFA’s Sr. Strategic Advisor Bob Dinneen (WIBW AUDIO)

Growers cheer ethanol rethink (My San Antonio/Illinois News Network)

E15 vs. E10: Here's What Trump's Ethanol Deregulation Push Means (Fortune/Bloomberg/Yahoo! Finance)

Readers' Forum, Oct. 12, 2018: Indiana needs E15 year round (Tribune Star)

Experts: Ethanol policy shift could bring wide range of effects for agriculture (The Eagle)

Trump's ethanol plan: Hype now, legal fights later (Reuters/Daily Mail)

Trump’s ethanol move is good news for motorists: Pacific Ethanol CEO (FoxBusiness)

Here’s what Trump’s ethanol plan means for farmers, refiners and motorists (MarketWatch)

Ethanol Expansion a Win for Farmers (KAAL)

Don’t Buy Big Oil’s Lies On E15 (Urban Air Initiative)

E15 OPPONENTS HAVE AN ALLY IN KAVANAUGH: (Politico's Morning Energy)

American corn growers claim ethanol policy victory (Western Producer)

Marathon Weighs Selling High-Ethanol Gas in Minnesota (Bloomberg)

Year-Round E15 Sales Won’t Keep Floundering Ethanol Policy Afloat (Morning Consult)

President Trump’s Ethanol Decision Exacerbates Bad Policy (RealClearEnergy)

E-15 good for farmers, bad for boats (KCAU-TV)

Excerpts from Bloomberg: President Donald Trump is moving to clamp down on a scandal-plagued $2.25 billion market in biofuel compliance credits, embracing reforms that could block Wall Street banks from trading them.

Trump will direct his Environmental Protection Agency on Tuesday to pursue the changes as a way to quash manipulation and bolster transparency in the obscure Renewable Identification Number market, said a senior White House official. At the same time, Trump will order the EPA to take steps to enable the year-round sale of gasoline containing as much as 15 percent ethanol, according to the official, who discussed the planned announcement on the condition of anonymity.

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Both steps require separate, formal rulemaking by the EPA, which could take months. Even then, there could be years of additional uncertainty, as foes in the oil industry have vowed to challenge an EPA waiver allowing year-round sales of E15 gasoline, arguing that the agency does not have the legal authority to issue it administratively, without further action from Congress.

The planned market reforms come amid criticism of the Bush-era Renewable Fuel Standard that compels refiners to use biofuel. Those companies use tradable credits to prove they have satisfied annual blending quotas, but the market for those has been riven with scandal. The U.S. government has obtained more than 30 criminal convictions for biofuel fraud, with some scam artists selling fake credits tied to fuel they never produced.

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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.

Trump is asking the EPA to consider an array of market reforms. For instance, the agency could limit trading to the fuel refiners and importers that are required to fulfill U.S. biofuel quotas, the senior White House official said.

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Independent refiners, including Valero Energy Corp., HollyFrontier Corp. and PBF Energy Inc., have recommended some of the changes.

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Trump’s planned E15 shift delivers an immediate political victory to biofuel producers and corn farmers who have been battered by the president’s trade policy and China’s retaliatory tariffs. The broader trade war that has ensnared agriculture may have played a role in the Trump administration’s E15 action, Irwin said. READ MORE

Excerpt from The Hill: A senior White House official said the plan was part of President Trump’s free market plan.

“This action is basically specifically directed at increasing the supply of biofuels and providing consumer choice and in line with the president's approach to propping up the free market,” the official told reporters on a call.

“The president has repeatedly stated his support of the Renewable Fuels Standard (RFS) program and thinks it’s good to have domestically created fuel here and think it will be good for the agriculture industry overall.”

Through the memo, the White House will ask the Environmental Protection Agency (EPA) to formally draft a regulation allowing for the use of E15 year-round. No formal text has yet been provided. The rule will go through a formal comment period, the official said. READ MORE

Excerpt from Urban Air Initiative: “This President ran largely on a platform of deregulation and opening domestic markets and opportunities” said UAI President David VanderGriend. “Giving consumers access to year round, clean burning, low cost ethanol blends at increasing volumes is an important first step. Recognizing and removing a range of other barriers to allow for even more consumer choice is the next step in a long road to better health, stimulating the rural economy, and energy security.”

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“We look forward to working with the Administration and the EPA to use the best available science that will show ethanol is a far superior fuel additive to the toxics in gasoline and can provide an efficient, cost effective fuel choice. If 15% ethanol is good, imagine what blends of 25 or 30 percent or more can do to clean up gasoline and save lives, said VanderGriend.” To access these higher blends, UAI will continue its technical focus of getting the vehicle emissions model known as MOVES updated along with ethanol’s life-cycle analysis. UAI is also working to stop limitations on ethanol blends. READ MORE

Excerpt from Politico's Morning Energy: The president took a victory lap in Iowa Tuesday night after formally directing EPA to open the door to year-round sales of E15. Though the White House did not broadcast the announcement before Trump's campaign rally in Iowa, the president was joined by a host of corn state lawmakers in the Oval Office, Pro's Eric Wolff reports . "This is great for our farmers, and it's a promise I made during the campaign, and as you know I keep my promises," Trump said before climbing into Marine One, later adding he expected the increase in ethanol sales would reduce fuel prices. It will take EPA until sometime next spring to actually implement the policy.

Potentially sensing the oil industry's distaste for the move, the president also told reporters Tuesday that he's getting "expedited approval" for a pipeline project in Texas, though he didn't elaborate on which one. The White House did not return ME's request for further information. READ MORE

Excerpt from Politico's Morning Energy: The White House on Thursday released its E15 waiver fact sheet in which Trump directed EPA to start the rulemaking process to consider expanding waivers for fuel blends of 15 percent ethanol, and "consider reforms to increase transparency and prevent price manipulation in the RIN market." READ MORE

Excerpt from Politico's Morning Energy: Trump's promise to boost ethanol sales will have to survive an inevitable court challenge once EPA formally issues an E15 waiver sometime next spring, and the oil industry does not think the agency has the legal authority it needs to follow through, Pro's Eric Wolff reported Wednesday. On that front, they appear to be in agreement with newly sworn-in Supreme Court Justice Brett Kavanaugh, who offered his views in a 2012 case over a partial waiver. The case was dismissed on procedural grounds, but Kavanaugh wrote a dissenting opinion arguing that EPA was misinterpreting the Clean Air Act. "On the merits, I conclude that the E15 waiver violates the statute," he wrote in Grocery Manufacturers Association v. EPA. "The waiver might be good policy; if so, Congress has the power to enact a new law permitting E15. But under the statute as currently written, EPA lacks authority for the waiver." READ MORE

Excerpt from Western Producer: Kelly Nieuwenhuis, an Iowa farmer and director of the Iowa Corn Promotion Board, said the announcement is a rare victory for growers.

“As farmers we haven’t seen a lot of positive things happen recently but we see this announcement as a win,” he told reporters on the conference call.

Nieuwenhuis was asked what year-round E15 could do for U.S. corn demand.

“The numbers are all over the place as far as how much demand for corn this could be,” he said.

“I know the number two billion bushels has popped up a few times, and that’s not going to be an overnight thing, but with time and growth there’s that potential.”

That is how much Growth Energy expects annual corn demand to rise. That would be a 35 percent increase over the 5.65 billion bu. of corn currently consumed by the U.S. ethanol sector.

Two billion bu. of additional annual demand from ethanol would have a big impact on corn prices. It is almost as much as the 2.4 billion bu. that gets exported annually from the U.S.

Ben Buckner, chief grain analyst with AgResource Co., doesn’t buy that lofty estimate. He said 1,300 gas stations are equipped with E15 pumps in the U.S., and he doesn’t expect many more before summer.

Those stations would sell an estimated 227 million litres of additional ethanol during the three summer months that E15 used to be forbidden. That would require about 20 million extra bu. of corn.

“Mathematically, it doesn’t seem all that significant, at least for 2019,” he said.

Over time, more E15 pumps could pop up across the country and in the long term it could result in maybe 300 to 500 million bu. of additional corn demand, said Buckner.

That might boost corn prices by five to 10 cents a bushel annually, he added.

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He said ethanol is much cheaper than gasoline, and E15 will be cheaper than E10, so he anticipates good demand for the fuel. READ MORE