White House Presses Biofuel, Oil Executives for Compromise

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September 12, 2019

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by Mario Parker and Jennifer A Dlouhy (Bloomberg/Investors Business Daily) Discussions aimed at breaking logjam over biofuel plan; Friday deadline issued for ideas on potential compromise -- Trump administration officials are squeezing biofuel and oil refining executives to agree to a plan to bolster corn-based ethanol and soy-based biodiesel.

In a meeting at the White House on Wednesday, President Donald Trump’s economic advisers gave biofuel producers a Friday deadline for providing ideas on a possible compromise.

Renewable fuel advocates pushed back on a draft administration plan, arguing it would do too little too late to help the industry and offset exemptions allowing oil refineries to dodge annual biofuel-blending quotas, said people familiar with the matter who asked not to be named describing the private deliberations.

They pushed the Trump administration to factor those waived quotas into biofuel-blending targets for 2020, which the Environmental Protection Agency is legally obligated to finalize by Nov. 30.

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The administration is meeting separately Wednesday afternoon with oil refiners, including representatives of Valero Energy (VLO), PBF Energy (PBF), Monroe Energy LLC, HollyFrontier (HFC), Marathon Petroleum (MPC) and Phillips 66 (PSX).

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Waivers have lowered the cost of compliance credits that are tied to each gallon of biodiesel and help the product compete against lower-cost petroleum-based diesel. Lower credit prices have reduced the margin that blenders can recover at the pump, hurting biodiesel demand, industry leaders told the administration. READ MORE

Biofuels Groups Pressed on Deal -- Ethanol, Ag Interests Not in White House RFS Meeting (DTN Progressive Farmer)

White House pushes biofuel deal to biofuel producers, oil refiners: sources (Reuters)

White House summons industry leaders in bid for biofuel deal (AgriPulse)

Industry nabs White House sit-down to push blending policy (E&E News)

Waiver Issue "Fix" Discussion Takes Place (RFD TV)

Ernst to Trump: Stay home until we have deal (E&E News)

Grassley looks for more farm state support for ethanol, biodiesel (Sioux City Journal)

Sen. Tina Smith weighs in on volatile ethanol economics (KEYC; includes VIDEO)

WHAT'S PROGRESS ON RFS? (Politico's Morning Energy)

Trump meets with senators from key farm states, touts biofuel deal progress (Reuters)

Trump Meets With Oil Refining Executives Amid Talks on Biofuel (Bloomberg)

Ethanol Industry Calls on Trump to Deliver (Wall Street Journal)

STEVE KING: OIL INDUSTRY HAS PRESIDENT TRUMP’S EAR (Iowa Starting Line)

Excerpt from DTN Progressive Farmer: Biofuels and agriculture companies met at the White House to discuss a Renewable Fuel Standard deal, but two sources told DTN the meeting did not include farm interest groups or farmer-owned ethanol plants.

It was reported this week the meeting was to include Iowa-based biodiesel company Renewable Energy Group and Louis Dreyfus Company. Renewable Energy Group did not respond to DTN's request for comment.

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In response to the information coming from the meeting, a number of ethanol and agriculture groups released a statement:

"Biofuel and farm advocates today urged the administration to uphold the president's commitment to the Renewable Fuel Standard and address the economic crisis created by the Environmental Protection Agency's overuse of small-refinery exemptions.

"The following joint statement was issued by the National Corn Growers Association, the American Soybean Association, Growth Energy, the Renewable Fuels Association, the National Biodiesel Board, and Fuels America:

"We remain hopeful that President Trump will move swiftly to protect farmers and biofuel workers, but efforts to reverse the damage will be meaningless unless the agency acts now to stop the bleeding and accurately account for lost gallons from this point forward, beginning in the 2020 biofuel targets. Rural communities across America are counting on this administration to uphold the president's commitment to biofuels and restore integrity to the RFS."

That deal has been flatly rejected by biofuels and agriculture groups, primarily because it does not include reallocation of biofuels gallons waived from the RFS. To date the EPA has granted 85 small-refinery exemptions since 2016 totaling more than 4 billion ethanol-equivalent gallons.

On Tuesday, Sen. Charles Grassley, R-Iowa, told agriculture reporters, "The negotiations are still going on, and (Sen. Joni) Ernst, R-Iowa, and I are very much involved in pushing to get reallocation of every waived gallon."

Trump reportedly had intended to announce a biofuels plan this week. But pushback from the biofuels industry in response to details of the proposal leaked to the media apparently prompted the administration to shelve the plan.

According to an ethanol industry source, Trump's proposal includes adding gallons to the 2020 renewable volume obligation in the RFS to include 500 million gallons for conventional biofuels based on a court remand on 2016 volumes. The plan also called for adding 500 million gallons to the 2020 advanced biofuels category.

The industry has been calling on Trump to reallocate biofuel gallons exempted to larger refiners. However, the industry source told DTN there is no proposed reallocation offered in the original Trump proposal.

Instead, the proposal reportedly calls for projecting gallons lost to small-refinery exemptions in the future. However, this would not include reallocation of retroactive exemptions.

The proposal was to include other steps taken to increase sales of E15 and E85, although the details are sketchy at this point. READ MORE

Excerpt from Sioux City Journal: Sen. Chuck Grassley, R-Iowa, is looking for a little help from his friends.

Grassley wondered Wednesday where they are in the fight to promote the use of corn-based ethanol and soy-based biodiesel. He is frustrated that the debate over ethanol and biodiesel is characterized as an “Iowa discussion” when other states also have a stake in the federal policy.

“How come this whole thing, discussion with the White House and the EPA and everybody else, just seems to be an Iowa discussion when there’s at least 14 states that are big corn-growing states and every one of those states, I’ll bet, has ethanol in it,” Grassley said during his weekly conference call with reporters. “Where are the senators from all of these other states?”

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In addition to Iowa, which produces 18 percent of the United States corn crop, the top corn-growing states are Illinois, Nebraska, Minnesota, Indiana, South Dakota, Kansas, Wisconsin, Missouri, Ohio, North Dakota, Texas and Kentucky, according to the U.S. Department of Agriculture.

Six states — Iowa, Nebraska, Illinois, Minnesota, Indiana and South Dakota — produce 70 percent of the nation’s ethanol, according to the U.S. Energy Information Administration. READ MORE

Excerpts from Politico's Morning Energy: WHAT'S PROGRESS ON RFS?With President Donald Trump's promised two-week deadline quickly approaching, he has sought to craft a compromise between the oil industry and corn growers on the Renewable Fuel Standard. But it remains to be seen what that compromise will be.

The White House has shown little sign it will curb EPA's use of waivers allowing some refiners to ignore the requirements under the RFS to blend ethanol or offset the volumes expected to be lost to those exemptions in the annual rule, Pro's Eric Wolff reports, according to sources in the oil and biofuel industries. And, some in the biofuel industry warned that any agreement that doesn't address those waivers would not win the support of the agricultural community.

Still, Trump met on Wednesday with CEOs from Valero Energy and Marathon Petroleum, as well as Continental Resources' founder Harold Hamm in an effort to find the refiners' path to a deal. Meanwhile, staff from the National Economic Council held a pair of separate meetings with refiners and biofuel companies. Trump also met with corn-state senators Thursday, while oil-processing states are angling for a meeting today. (Refineries also got some back up from a group of senators, who laid out their concerns in a letter to Trump on Thursday.) READ MORE

Excerpt from Reuters: Trump met with a group of corn-state Republican lawmakers that included Iowa senators Joni Ernst and Chuck Grassley on Thursday afternoon, four sources familiar with the matter said. Iowa Governor Kim Reynolds also attended the meeting, two of the sources said. The president is expected to meet with senators representing oil-producing states on Friday to continue discussions on the issue, sources said.

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The Thursday discussions follow a meeting the president had with two of the largest U.S. refining companies on Wednesday. Valero Energy CEO Joe Gorder and Marathon Petroleum CEO Gary Heminger asked Trump for solutions to help the refining industry cope with the cost of rising biofuel blending mandates, including potentially capping the price of blending credits refiners must acquire to comply, sources familiar with the matter said.

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So far, biofuel producers have balked at the administration’s offer of a one-time increase in mandates, instead pushing for a structural change to biofuel policy that would compensate them for future exemptions to refiners as well.

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U.S. biofuel credits on Thursday rose 2.5 cents, or 15%, on refiners including Phillips 66 and Valero Energy Corp actively buying in the market, traders said.

Energy industry advocacy groups wrote on Thursday to the heads of the Department of Agriculture and Environmental Protection Agency objecting to the proposals under consideration and in favor of small refinery exemptions.

“The exemption must be available to any small refinery, regardless of ownership, in order to achieve the purpose of the statute,” the letter said. READ MORE