Ya Happy Now? Trump Administration Reveals Grand Bargain on Biofuels Volumes, E15, Small Refinery Waivers

October 07, 2019

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by Jim Lane (Biofuels Digest) In today's Digest, the 4-Point Agreement, the backstory, the Glad Tidings, the Unfinished Business, and reaction from the stakeholders as we parse out the impact on future volumes, waivers, backfills, RINs, E15, blender pumps and more, ....

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.

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

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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 READ MORE

Klobuchar blasts Trump ethanol proposal as 'too little too late' (The Hill)

EPA to release supplemental rulemaking to account for future SREs (Biomass Magazine)

Ethanol Expansion A 'Partial Victory' For Farmers And The Biofuel Industry (HPPR)

Trump Announces Biofuel Agreement (Atlantic News Telegraph)

Chet Thompson: Biofuel mandates put Wisconsin jobs, votes at risk (Madison.com The Cap Times/American Fuel & Petrochemical Manufacturers)

Gov Kim Reynolds Releases Statement on President Trump’s Biofuels Announcement (River Cities Reader)

Iowa Biodiesel Producers, Soybean Farmers Welcome Plan to Restore Integrity to The RFS (River Cities Reader)

Farm Bureau reacts to Trump administration action on ethanol and biofuels (Journal Democrat)

Aiming to help farmers, feds change ethanol rules (WLNS)

Ethanol Applauds New White House Proposal to Restore Demand on the HAT Monday Morning Edition (WOWO)

New White House Ethanol Plan Revealed, More Details Expected (Hoosier Ag Today)

Trump’s billion-dollar gambit: An ethanol deal to meet the demands of farmers and Big Oil (CNBC)

EPA pledges biofuel boost to calm corn states (Finance & Commerce)

Trump boosts ethanol demand for 2020, in blow to refineries (Houston Chronicle)

Trump sides with farmers in ethanol proposal, angering oil industry (The Hill)

Trump administration rolls out new rules to increase ethanol consumption; The supports for ethanol help farmers and could win Trump votes, but oil industry is riled. (New York Times/Star Tribune)

Trump admin proposes boost for ethanol blending (E&E News)

Biofuels' New Deal: Trump Administration Details Plan to Restore RFS Volume Levels (DTN Progressive Farmer)

TRUMP BIOFUELS PLAN WOULD EXPAND BLENDING REQUIREMENTS BEGINNING IN 2020 (Brownfield Ag News)

EPA to release supplemental rulemaking to account for future SREs (Ethanol Producer Magazine)

EPA biofuel announcement sets up additional rulemaking, more lingering questions (Agri-Pulse)

After Farm Belt Outcry, Trump Administration Revamps Ethanol Rules: Producers of the corn-based fuel say they’ll wait to see whether changes push up demand (Wall Street Journal)

Trump administration promises biofuel boost to farmers, angering Big Oil (Reuters)

Trump EPA Pledges Biofuel Boost to Calm Corn-State Criticism (Bloomberg)

Trump administration says plan would restore ethanol demand (Associated Press)

Trump administration tries to pacify farmers with major biofuels boost (Politico)

Iowa farmers welcome Trump decision, but question if it can reopen closed ethanol plants (Des Moines Register)

Trump announces deal to boost demand for ethanol, in boon for farmers (Washington Examiner)

Signal to Noise: Why Does the RFS Deal Feel Less Than Complete? (Farm Journal AgWeb AUDIO)

The Trump administration should end, not expand, the ethanol mandate (Washington Examiner)

RINs jump, then retreat after US EPA biofuels-blending announcement (S&P Global Platts)

JOHNSON PRAISES BIOFUELS AGREEMENT; PETERSON CAUTIOUS (Brownfield Ag News)

PETERSON STATEMENT ON RENEWABLE FUEL STANDARD ANNOUNCEMENT (Office of Representative Colin Peterson (D-MN 7th)

NBB: BIOFUELS PACKAGE A POSITIVE “FIRST STEP” (Brownfield Ag News)

TRUMP BIOFUELS PROPOSAL LACKS CLARITY ON GALLONS ALREADY LOST TO WAIVERS (Brownfield Ag News)

Trump Administration Aims To Increase Demand For Ethanol Amid Push From Minnesota Lawmakers (CBS Minnesota)

ETHANOL DEAL AROUND 16 BILLION GALLONS: (Poltico's Morning Energy)

A Trump Policy Shift Gives Farmers in Key 2020 States ‘Exactly What We Wanted’ (New York Times)

GOP, farm leaders enthused about RFS announcement, but Dems, market cautious (Fence Post)

Corn Industry Welcomes Trump's Ethanol Boost for Fuel (NewsMax)

TRUMP’S VAGUE PLAN TO BOOST ETHANOL HAS THE OIL INDUSTRY THREATENING TO SUE (Successful Farming)

EPA Plans Biofuel Boost in 2020 -- Increased blending to help offset small-refinery exemptions (CSP Daily News)

Joni Ernst : Iowans, Biofuels Leaders Praise Ernst for Fighting on Behalf of Farmers and Producers (Market Screener)

Proposed new EPA rules could help E-15 gasoline blends (Prairie Public News)

Excerpt from The Hill: “They've done some really irreversible damage,” Klobuchar (Sen. Amy Klobuchar (D-Minn.)) said, referring to an August decision to grant 31 waivers to refineries to exempt them from blending in ethanol.

“Any effort is helpful. But this is I fear, too little too late,” she added, saying the proposal still lacked important details.

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The waivers also come as Trump’s trade war is closing markets for Iowa corn.

“The one thing they ask the government is do no harm,” Klobuchar said of farmers. “And at least be consistent in your policy so they can make decisions about investment. He's been the opposite. It's been total chaos.”

Though subsidies have been given to many farmers, “that's not a substitute for the business that they want to build,” she said. READ MORE

Excerpt from Agri-Pulse: The plan, announced Friday morning, would launch a rulemaking effort to allow the Environmental Protection Agency to reallocate gallons of biofuel production waived through Small Refinery Exemptions to the Renewable Fuel Standard. But absent from the announcement were rumored additional volumes for the biofuels industry or language to refund or rebate refiners if the price for biofuel mandate credits exceeds a certain threshold.

EPA Administrator Andrew Wheeler hailed the news as “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." Ag Secretary Sonny Perdue said the deal “promotes economic growth and supports our producers.” But the forthcoming details will likely shape how the biofuel and oil sectors ultimately view the deal.

An EPA official told reporters Friday that the action is “we expect this action to be signed in the next week or so, which will facilitate issuing the final volumes for 2020 later this year.”

The official said the administration plans to seek public comment on “how to and at what levels to address small refinery relief in the 2020 compliance year.

“These ranges are informed by the last three compliance years at the statutory direction provided to EPA by Congress,” the official added.

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A release on the subject discusses additional efforts the administration plans to take, including “a rulemaking process to streamline labeling” of E15, continuing to “evaluate options for IRN market transparency and reform,” continuing to “work to address ethanol and biodiesel trade issues,” and USDA seeking “opportunities through the budget process to consider infrastructure projects to facilitate higher biofuel blends.” No additional details were provided as to how the administration plans to achieve those goals.

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But some were more measured in their comments. American Coalition for Ethanol CEO Brian Jennings said because the plan “is short on details and the final outcome is dependent upon a new rulemaking process, it’s unrealistic and premature for me to conclusively praise it at this stage.” READ MORE

Sources tell Agri-Pulse the plan as relayed on a White House stakeholder call Thursday night includes reallocating volumes on a three-year rolling average of waived volumes. The EPA official also clarified the proposed rulemaking will account for future exemptions, not the exemptions already granted by the Obama and Trump administrations.

The plan also allows the administration to continue issuing the waivers to eligible refineries. READ MORE

Excerpt from Wall Street Journal: “I think there was a lot of nice-sounding words, and not a lot else,” said Brian Grossman, an agricultural trader with Chicago-based Lakefront Futures & Options LLC.

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The Agriculture Department will evaluate new infrastructure projects that would allow higher-level biofuel blends.

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The lack of specifics around how the EPA will ensure the blending of 15 billion gallons of ethanol into the fuel supply is keeping grains traders skeptical about how much this plan will increase corn consumption.

“This is just like the trade war, they’ll believe it when it happens,” said Sal Gilbertie, president of Teucrium Trading LLC.

Ethanol production has been declining since August, after the EPA granted 31 waivers to small gasoline refineries allowing them to forgo mixing ethanol into their fuel as required. From the beginning of August into mid-September, U.S. daily ethanol production fell by roughly 100,000 barrels to 943,000 barrels, the lowest rate of production since April 2016. It has since rebounded to 958,000 barrels a day this week.

Eamonn Byrne, CEO of ethanol producer Plymouth Energy, praised the plan but said his company doesn’t immediately plan to restart its Merrill, Iowa, plant, idled in July.

“We have to let the market digest this information and make a decision then,” Mr. Byrne said. READ MORE

Excerpt from Brownfield Ag News: American Coalition for Ethanol CEO Brian Jennings says not to be missed among the positives he sees in President Trump’s biofuels proposal is a lack of action on gallons already lost to small refinery exemptions.

“I know I’m supposed to fall in line with everyone else and sing the praises of this plan, and there are some very positive developments that could come from this.”

But he tells Brownfield it’s disappointing the 4 billion gallons-worth of small refinery hardships granted to 85 refiners since 2016 are not being dealt with.

Jennings says he is pleased the Trump Administration has signaled it plans to adhere to RFS requirements going forward, but points out the proposed rule is subject to a public comment and rulemaking period.

“This is not a day to celebrate. This is not a day to uncork any champagne bottles. This is simply a proposal, a promise to do better in the future.”

Jennings says renewable fuels advocates need to stay engaged throughout the rulemaking process.

The public comment period for the proposed biofuels rule runs through November. READ MORE

Excerpt from Politico's Morning Energy: ETHANOL DEAL AROUND 16 BILLION GALLONS: Trump said the next Renewable Fuel Standard rule will require "close to 16 billion" gallons of ethanol blending. EPA last week said it would exceed the 15 billion gallon statutory limit for conventional ethanol as part of its effort to reallocate gallons lost to small refinery exemptions. Trump touted the biofuels package at the signing ceremony for a Japan-U.S. trade agreement on Monday. "That is a lot of gallons," he said. "They should like that in Iowa and all the different places.” READ MORE