Oil-State Republicans Want USDA Banished From Biofuel Waivers

(Bloomberg) -- A dozen Republican senators are insisting that U.S. Agriculture Secretary Sonny Perdue stop intervening in government decisions over granting oil refineries exemptions from biofuel-blending quotas, warning the White House that his involvement is potentially illegal.

The Republicans issued their demand in a letter to President Donald Trump, following reports the Agriculture Department chief pushed regulators to pare the exemptions and redistribute the waived quotas to other refineries, although they say federal law gives Perdue no role in the issue. The move escalates an intense battle between two core Trump constituencies -- oil and agriculture -- heading toward the 2020 elections.

“We would view any decisions to further delay, reduce or deny hardship relief to small refineries or reallocate the obligations of small refineries to other refineries as the result of the secretary of agriculture’s impermissible interference,” said the senators, led by John Barrasso of Wyoming. “We are confident that others, including the federal courts, would do the same.”

Nominees Blocked

The new effort comes from senators with oil-refining interests in their states. Senator John Kennedy, a Louisiana Republican, already vowed to block confirmation of three Trump nominees to Agriculture Department posts until the agency distances itself from decisions on refining exemptions.

Representatives of the Agriculture Department didn’t immediately respond to emails seeking comment on the senator’s letter, dated Friday.

At issue is a 14-year-old federal law that dictates oil refineries use biofuel, such as corn-based ethanol and soybean-based biodiesel, to satisfy annual quotas set by the Environmental Protection Agency. The statute also authorizes the EPA to issue exemptions for small refineries facing a “disproportionate economic hardship.”

Biofuel proponents argue the administration has handed out the waivers too freely and is undermining domestic demand for the products. They have taken their case directly to Trump -- one farmer even pleaded with the president to halt waivers while they shared a stage at an Iowa ethanol plant -- and have looked to Perdue as a key administration ally.

Speculation that pressure is having an impact -- and that the Trump administration will dial back waivers in response -- has driven a surge in the price of tradable credits used to prove refiners have fulfilled biofuel blending quotas. Since June 10, the day before Trump’s Iowa visit, those Renewable Identification Numbers tracking 2019 ethanol mandates have increased 82%.

Under federal law, refinery exemption decisions are delegated only to the EPA in consultation with the secretary of energy, the senators said. They cited an analysis from the nonpartisan Congressional Research Service as saying “a court would likely interpret the exclusion of the secretary of agriculture from the small-refinery exemption provisions as intentional.”

--With assistance from Mike Dorning and Mario Parker.

To contact the reporter on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Steve Geimann

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