Biofuel Policy Revision Is Said to Be on Verge of Collapse

(Bloomberg) -- A tentative deal to revamp U.S. biofuel policy appeared to collapse Tuesday when the White House indefinitely delayed an expected announcement of the planned changes, according to three people familiar with the move.

The postponement of a directive outlining the deal may mark the end of the latest effort to overhaul the American renewable fuel mandate with an eye on lowering costs for refiners forced to blend biofuels into gasoline, said the people, who asked not to be named to discuss internal deliberations.

Despite months of negotiations, the Trump administration has struggled to find a balance on a contentious issue that divides two of the president’s key constituencies: Midwest farmers and refiners in Pennsylvania. On the campaign trail in 2016, Donald Trump promised to support ethanol, a pledge embraced by farmers who grow the corn used to produce it.

Senator Chuck Grassley, a Republican from Iowa who threatened to call for Environmental Protection Agency Administrator Scott Pruitt’s resignation over the dispute, cheered the proposal’s apparent failure with a post on Twitter. "Pres Trump helped farmers by rejecting bad ethanol deal," Grassley said. "I appreciate. GREAT NEWS."

The planned directive -- in the works for weeks -- was meant to specifically outline planned changes that have been contested since the tentative deal was struck at the White House last month.

Even before Trump was presented with the draft document, farm state senators were attacking the proposal. Grassley told reporters Tuesday he thought Pruitt had “betrayed the president” with his agency’s handling of the biofuel mandate.

Pruitt Becomes a Target

Senator Joni Ernst, also an Iowa Republican, accused Pruitt of "breaking our president’s promise to farmers" in remarks to the S&P Global Platts Energy Podium in Washington on Tuesday. Ernst later wrote on Twitter that Trump "just assured me he won’t sign a deal that’s bad for farmers."

The plan’s apparent demise was celebrated by biofuel producers. Bob Dinneen, president of Renewable Fuels Association, said the group was "happy the president continues to recognize the importance of our industry to America’s farmers and rural economies across the nation."

Emily Skor, chief executive officer of Growth Energy, a biofuel trade group, said it looks forward to “refocusing this conversation” toward farm income and filling-station prices.

This may not be the end of the debate. Lawmakers are developing legislation to overhaul the Renewable Fuel Standard. The politics of the issue can shift along with gasoline prices. And some refiners that have been seeking lower compliance costs for years are unlikely to stop pushing for changes, leveraging the concerns of organized labor to help make their case.

"The president has heard the voices of hard-working union refinery workers that helped elect him," said Frank Maisano, a founding partner of Bracewell LLP’s Policy Resolution Group, who works with refiners. "We fully expect the president will deliver a common sense, win-win plan that provides new markets and opportunities for ethanol advocates and much-needed relief for refinery workers."

Refiners’ concerns generally center around the cost of compliance credits known as renewable identification numbers, or RINs, which they use to prove they have satisfied annual biofuel quotas. Even without formal changes, news reports about potential alterations to the mandate have caused the value of RINs tracking ethanol blending to plummet to a five-year low.

Trump administration officials previously agreed to lift summertime restrictions so a higher ethanol blend of gasoline known as E15 could be sold year round.

©2018 Bloomberg L.P.

Bloomberg
Stay Updated With Business News News On BloombergQuint