White House Is Said to Announce Compromise on Biofuel Changes

(Bloomberg) -- The Trump administration is slated to unveil biofuel policy changes, including efforts to tamp down costs for refiners while broadening the market for ethanol, according to people familiar with the action.

The announcement planned for Monday follows weeks of negotiations by the Agriculture Department, Environmental Protection Agency and Energy Department to flesh out a tentative deal struck at the White House last month, said the people, who requested anonymity to discuss the matter before details are made public.

The White House-brokered compromise aimed to offer something to every major stakeholder in the contentious debate over the U.S. biofuel mandate, including refiners forced to use corn-based ethanol and farm-state lawmakers who want to guarantee demand for the product. Under the 13-year-old Renewable Fuel Standard, refiners are required to use biofuel, often corn-based ethanol.

The contours of the compromise remained in dispute, and a White House memo meant to clarify the agreed-upon changes was delayed as regulators worked to turn the deal into specific regulatory proposals. The announcement by the White House on Monday may, in effect, be the delayed memo, one of the people said.

Refiners’ concerns generally center around the cost of compliance credits known as renewable identification numbers, or RINs, they use to prove they have satisfied annual biofuel quotas. Ethanol advocates, including Iowa’s Republican senators, Chuck Grassley and Joni Ernst, have argued that the EPA is undercutting annual biofuel quotas by more liberally exempting refineries from the mandates in response to a federal court ruling last year.

When he was running for president, Donald Trump promised Iowa voters he would support ethanol -- a pledge the state’s senators are invoking now.
“I just hope that whatever deal comes out is not something that will be perceived as breaking his promise to the folks that voted for him,” Ernst said in an emailed statement.

Summertime Restrictions

Trump administration officials already agreed to lift summertime restrictions on the sale of E15 gasoline so that fuel containing 15 percent ethanol can be sold year-round. It could take months to make the change, if the EPA tries to do it permanently through formal rulemaking.

Senator Ted Cruz, the Texas Republican who helped develop the deal, said administration officials also agreed to let refiners keep RINs tied to exported biofuel and use them for compliance with domestic blending quotas. Supporters say the change would keep more RINs available for compliance -- therefore lowering costs -- while encouraging exports of U.S. ethanol.

The EPA also could narrow the definition of what constitutes “economic harm” when deciding whether small refineries should be exempted from mandates. And regulators at the agency have been working to develop a process for incorporating exempted biofuel volumes into annual quotas -- a change that could require formal rulemaking to force refineries to seek the waivers earlier.

The Trump administration has little political room to maneuver. Grassley has threatened to seek EPA Administrator Scott Pruitt’s resignation if the agency undermines renewable fuel requirements.

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