Report: Trump Ordered Waivers: Ongoing Court Challenges May Be Only Avenue Left for Biofuels

August 19, 2019

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by By Todd Neeley and Chris Clayton (DTN Progressive Farmer) ...The president sided with oil refiners over ethanol producers and corn farmers, just two months after reiterating his support for ethanol at a rally held at Southwest Iowa Renewable Energy in Council Bluffs, Iowa, to celebrate the approval of year-round E15 sales.

Trump essentially ended what was an ongoing review of the waivers program, leading biofuels interest groups to question whether the administration changed course on its biofuels policy.

Dating back to 2016, Trump's EPA has granted 85 waivers totaling 4.03 billion ethanol-equivalent gallons. That means those gallons were not blended with gasoline and small refiners are not required to buy biofuels credits to comply either.

Based on DTN's reporting, the president's actions closely match what at least some ethanol interest groups heard last week in regards to the EPA announcement.

"It's something I was told by a contact last Friday when the exemptions came out," American Coalition for Ethanol Chief Executive Officer Brian Jennings told DTN.

"I guess it shouldn't surprise anyone."

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The industry as a whole does not have a problem with the EPA granting waivers to refiners who face true economic hardship, he said, so long as the agency reallocates gallons lost to waivers to other blenders and obligated parties.

As recently as 2013 and 2014, the EPA had been reallocating gallons. That changed, however, starting in 2016. The agency has not reallocated gallons lost to waivers under the Trump administration.

At this juncture, the ethanol industry is down to convincing courts that the EPA's actions are unlawful. There are a number of court cases challenging the agency.

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And, about the report that Trump ordered the action? "If that's true then that's a huge disappointment and really we can no longer point a finger at a rogue EPA on these waivers if the president himself is personally involved in making these decisions. Then this falls squarely on him." (Geoff Cooper, President and CEO, Renewable Fuels Association)

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"You got big oil and EPA on one side, and corn farmers and ethanol plants on the other side," Hitchcock said. In adding up 4 billion gallons of small-refinery exemptions without reallocating the volume, Hitchcock said, "How can anybody sit there and tell you that's not a negative in demand for the ethanol industry?"

Hitchcock said the ethanol industry overall is hurting. "All I can say is thank goodness for the bankers having some tolerance," he said.

With exemptions going to refiners producing 75,000 barrels of oil or less every day, Hitchcock (Tom Hitchcock, chief executive officer of Redfield Energy LLC, ethanol plant in Redfield, South Dakota) said the smallest refineries are larger than the biggest ethanol plants. At 75,000 barrels, those refiners are producing 3.1 million gallons a day.

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He (Jennings) said the industry has been "tippy-toeing" around the small-refinery exemptions, largely because farmers have continued to show strong support for President Trump. As he indicated in a speech Thursday, Jennings pointed out that if EPA under Hillary Clinton had granted these exemptions the ethanol industry and farmers would be livid.

"Rural America wouldn't be turning the other cheek. We would be pissed off and we would be raising Cain," Jennings said. "But we turn the other cheek when it is the Trump EPA."

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Jennings said most ethanol plants have survived because of low debt and good capital reserves built up over time. "How much cash do we have to burn waiting for the RFS mismanagement to get fixed?" he asked.

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Just days after Trump's reported decision on small-refinery waivers, he visited a petrochemical complex under construction in Pennsylvania, drawing the ire of Sen. Charles Grassley, R-Iowa.

See that story here: https://pittsburgh.cbslocal.com/…

During a call with agriculture journalists on Tuesday, Grassley was stunned to learn Trump was speaking at a Shell petrochemical company about growth in the oil and natural gas industries. READ MORE

EPA's biofuel waiver decision influenced by Trump phone call (Digital Journal)

EPA is undermining ethanol: Excessive waiver approvals cut demand inappropriately (The Messenger editorial)

ABOUT THAT CROWD: (Politico's Morning Energy)

Deere Is Coping, but Its U.S. Farm Customers Aren’t (Wall Street Journal)

Trump directive ended review of ethanol requirements: report (The Hill)

Sen. Chuck Grassley: Trump EPA ‘Screwed’ Farmers With Biofuels Exemptions (Huffington Post; includes VIDEO)

Ernst calls out Trump on ethanol discussion (KCCI; includes VIDEO)

Biofuel Producers, Farmers Say RFS Waivers Break Trump Promises (North American Climate Smart Agriculture Alliance)

Mississippi energy plant, 2 others to close after Trump administration gives waivers to competitors (Magnolia State Live)

Ethanol Producers Livid with EPA Waivers (Atlantic News Telegraph)

Farmers stung by EPA's waivers (AgriNews)

Grassley: EPA 'screwed us' with ethanol waivers (E&E News)

Farm-state Republican senator blasts Trump administration: ‘They screwed us’ (AlterNet)

EPA’s E15 waivers for oil companies hurt farmers (Portage Daily Register)

OIL BAILOUTS FORCE POET TO LOWER PRODUCTION -- FAMILY FARMERS AND RURAL COMMUNITIES SUFFER (POET)

Trump Administration Must Shut Down RFS Waiver Giveaways (Solutions from the Land)

NEBRASKA ETHANOL BOARD COMMENTS ON REFINERY BIOFUEL WAIVERS (Nebraska Ethanol Board)

POET Reduces Ethanol Output at Half of U.S. Biorefineries (Wisconsin Ag Connection)

Marquis Energy to Cut Ethanol Production at Necedah Plant (Wisconsin Ag Connection)

To the editor: Farmers need ethanol (Toronto Blade)

ONE OF NATION’S LARGEST ETHANOL COMPANIES ANNOUNCES JOB CUTS COMING (KNEB)

Excerpts from The Messenger: For many years, there has been a lack of enthusiasm at the EPA for ethanol. Some ethanol backers contend that that this has led the agency to grant RFS waivers inappropriately. The EPA has just announced that it has granted waivers to 31 refineries that it claims meet the requirements of the waiver program. This action has been harshly criticized by Gov. Kim Reynolds and Iowa’s two U.S. senators — Charles Grassley and Joni Ernst. All three Republicans have long been strong advocates of ethanol. The governor made clear her concern about the recent waivers in a statement issued Aug. 10.

“It is unconscionable for Administrator (Andrew) Wheeler’s EPA to continue to gut the RFS through small refinery exemptions while padding the pockets of oil refiners,” Reynolds said.

Grassley, while acknowledging that the EPA has been somewhat less willing to grant these waivers than in the past, made clear he remains dissatisfied with the agency’s approach.

“This is a small step in the right direction, but I’m very skeptical that every company receiving waivers truly needs them,” he said.

Ernst is similarly unimpressed with the justification for the waivers and is co-sponsoring legislation that would result in Congress policing more strongly the waiver-granting process.

“I’m committed to holding EPA accountable and ensuring they not only uphold the intent of the RFS but that they’re more transparent and forthcoming in this exemption process,” she said.

That approach makes sense to us. Ernst’s Renewable Fuel Standard Integrity Act of 2019 warrants careful consideration by her colleagues in Congress. READ MORE

Excerpt from Politico's Morning Energy: ABOUT THAT CROWD : Employees at a Shell petrochemicals plant outside of Pittsburgh where President Donald Trump gave an energy speech (that frequently went off topic) had to attend his speech or take the day off with no pay, the Pittsburgh Post-Gazette r eports. Those did not attend have an excused but non-paid absence and were not eligible for overtime on Friday. READ MORE

Excerpt from Atlantic News Telegraph: “I’m just livid,” Elite Octane President and CEO Nick Bowdish said Monday. “The president went to Washington D.C. to drain the swamp and he’s really become the swamp. The only person that’s won here is Carl Ichan who got off not having to comply and saving about $190 million because he’s president Trump’s friend.”

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“I’m really happy Sen Grassley is out being as pointed as he is saying President Trump just screwed the farmer,” Bowdish said. “Everybody in Cass County and within 300 miles of Cass County, needs to understand that. This is absolutely ridiculous that multi-billion dollar corporations would be given a free pass to use renewable fuels because of somehow twisting up an economic hardship to blend a fuel (ethanol) that today is $1.25 a gallon into gasoline that is still, wholesale, well over $1.50. It is just capital cronyism at it’s best.”

“Three years in a row, under president Trump’s leadership, he’s decimated this program and I just think it is so disingenuous that he would come out to Iowa and brag about how he loves ethanol and he’s for the farmer — and then to go back and do this. People wanted to give him some room and say that was his EPA administrator Scott Pruitt and he fired him. But now clearly, clearly in the last week president Trump was personally involved and made this decision and it’s very, very discouraging for everybody in agriculture.”

In the end, Bowdish says, the action is part of a pattern that will affect not just ethanol producers, but anyone involved in agriculture.

“Eventually how this all unfolds is that every person who is growing corn and soy, every persons that owns land and gets paid a cash rent payment — the economics of what is processing almost 40 percent of the production in Iowa — the economics are getting so bad that these plants are just going to stop using this corn. And the corn is going to backup in the country and it really doesn’t matter that we just had the toughest spring in many generations and this corn crop maybe isn’t going to be a record. That’s not going to matter because president Trump is destroying demand both our export markets and now at home.”

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“This is not a republican or democrat issue. This is rural America against the largest oil corporations in the world. And the president just picked the largest oil corporations in the world.”

Locally, Bowdish says, Elite Octane has not cut production — largely due to it’s relatively new, modern and efficient plant. But other ethanol producers may not be so lucky.

“Our plant is still making the same amount of gallons every day — but our economics, both at our facility and facilities all across Iowa are hovering near break-even,” he said. “We consider ourselves one of the more efficient plants in the industry — for those plants that don’t have that same structural efficiency — their economics have gotten so bad that they are beginning to shut down like the plant in Merrill Iowa.”

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ethanol producers — who at one time hailed Trump for reversing a federal law that allows the sale of a 15 percent blend of ethanol year-round — may now be taking a closer look at the Democratic challengers.

“At the end of the day, if we don’t like this then we have to look at what’s our alternative. With more than a dozen candidates running for the Democratic ticket, there are certainly some of those candidates that understand agriculture -somebody like a senator Amy Klobuchar from Minnesota. I think it really depends on who the Democrats pick to put up against the president,” Bowdish said, adding, “I think people are listening intently, at least the independent voters are, to what is the rural vision for some of these other Democratic candidates running for president.”

“A lot of us really want to support him, taking on China and we like what he is doing there, but if you’re going to use agriculture in that discussion and ask agriculture to take one on the chin you sure would think you would do everything you could to help agriculture succeed at home. Clearly a week ago Friday, he just poked us right in the eye.” READ MORE

Excerpt from AgriNews: Despite an order from the U.S. Court of Appeals, the EPA has said it will not reinstate the 500 million gallons withheld by the agency in 2016.

If the EPA is going to waive the lost gallons, it should be properly accounted for, said Doyal (Randy Doyal, CEO of Al-Corn Clean Fuel).

"So they've basically thumbed their noses and said no," said Doyal of the EPA. "That's incredible to me, from an administration that says it's on the side of the farmers and is looking out for them."

A decision on the waivers was delayed for months, which made Doyal think something was being worked out between the Department of Agriculture and the EPA to reassign lost gallons.

"And then we get nothing," he said. READ MORE