Ethanol exemption for refiners at risk
With 2020 race looming, Trump may boost Midwest farmers hurt by lack of a mandate
WASHINGTON — The future of an exemption shielding oil refining companies from a federal mandate that they blend corn-based ethanol into the nation’s fuel supply is looking increasingly uncertain amid increasing political pressure on the Trump administration ahead of the 2020 presidential election.
Months after the Environmental Protection Agency was expected to begin issuing exemptions from the most recent ethanol requirements, refineries are still waiting for the word.
The delay follows a visit by President Donald Trump to Iowa last month that, following his recent order to lift air pollution laws restricting the year-round sale of gasoline with a higher concentration of ethanol, was expected to be a hero’s welcome. But during his visit, Trump heard from farmers and those working within the ethanol industry that the refinery exemptions were hurting their business.
“They’re concerned and I think the president heard that concern directly from farmers,” said Geoff Cooper, president of the ethanol industry trade group Renewable Fuels Association. “The yearround allowance for E15 (gasoline with 15 percent ethanol) doesn’t do much if anything for ethanol demand if the (mandate) is not being fully enforced.”
Since the visit, Trump has reportedly pressured EPA Administrator Andrew Wheeler and Agriculture Secretary Sonny Perdue to take a look at what are known as small refinery exemptions, designed to provide relief for refineries in financial distress, which because of their size are less equipped to overhaul their operations to blend ethanol.
But in doing so, Trump is testing his relationship with the oil industry and Republicans representing oil states such as Texas and Oklahoma.
Last year more than 30 refineries across the country were issued exemptions, allowing them to
avoid blending or buying biofuel credits for an estimated 1.2 billion gallons of ethanol — about 8 percent of their total obligation under federal law, Cooper said.
Last week, 13 Republican senators, including Texas’ John Cornyn and Ted Cruz, wrote a letter to Trump, urging him not to take advice from Perdue, a former Georgia governor who has been an outspoken champion for corn farmers.
“Certainly the president cares a lot about Iowa in 2020 and the farm vote,” said Chet Thompson, president of the trade group American Fuel & Petrochemical Manufacturers. “The thing that’s encouraged us is he also cares about refiners, who have thousands of employees in states like Ohio and Pennsylvania that are going to be pretty important too.”
Ethanol is a big deal in Iowa and Nebraska, relatively small population states where agriculture plays an outsize role in the economy.
Trump’s calculation appears to be that even if he angers a few refinery workers, it’s not enough to swing the vote in Ohio or Pennsylvania, never mind Texas. But in Iowa, being labeled as anti-farmer could very well cost him the election; in the 2016 presidential race, only 52 percent of Iowans voted for him.
“It’s increasingly trending Republican, but the right Democrat can win in Iowa,” said Mark Jones, a political science professor at Rice University. “Ethanol is a good example of where you have a small number of very intense interests. It has a direct impact on the bottom line they can see, different from this broader negative impact on pretty much everyone else paying more for food and fuel.”
The hope among ethanol lobbyists is they can pressure Trump into shifting policy to increase demand for their product.
U.S. ethanol production has risen slowly and steadily over the past decade. But as of late June, production is down slightly in 2019 — about 12,000 barrels a day or 1 percent less than the same period last year, according to Department of Energy data.
How much of that is due to the refinery exemptions depends on the economist analyzing the situation. But with U.S. vehicles steadily getting more efficient and consuming less gasoline, the ethanol industry’s expansion plans in the United States are focused on selling fuels with higher concentrations of ethanol, such as E15.
But despite some investments by large retailers such as Sheetz of Altoona, Pa., and Murphy USA of El Dorado, Ariz., many gas stations have been reluctant to sell it, concerned about damage to motorists’ engines and their own gas pumps and tanks.
“I have a board member that was the first to sell E15, but the majority, 99.9 percent of those who attend our meetings, are not enthusiastic about E15,” said Rob Underwood, president of the Petroleum Marketers Association of America, a trade group representing gasoline station owners.
Were the EPA to stop issuing so many exemptions, that could force the fuel industry to embrace E15 and give farmers the boost they are hoping for.
And many are betting Trump will do just that. Scott Irwin, an economist at the University of Illinois, said Tuesday on Twitter that Republicans’ push to limit Perdue’s authority was a “real act of political desperation.”
“Refiners must not like what they are hearing behind the scenes,” he wrote.