Trump Looks to ‘Thread the Needle’ With Farms, Oil on Biofuels

(Bloomberg) -- U.S. biofuel policy moves this week show President Donald Trump’s delicate dance between two of his most vaunted constituencies: rust-belt voters and corn-belt farmers.

On Tuesday, the Environmental Protection Agency issued a long-awaited proposal, ordered by Trump as a gift to agriculture. It would allow year-round sale of gasoline with higher levels of corn-based ethanol, but also makes changes to associated credits as advocated by a segment of the oil-refining industry. On Thursday, the EPA waived five more refineries from 2017 biofuel-blending quotas, as oil leaders argue the mandate hurts gasoline makers.

A 2005 energy law, signed by George W. Bush, and expanded in 2007, calls for American oil refineries to blend escalating amounts of renewable fuels, like ethanol and soy-derived biodiesel, into petroleum. The law sparked a perpetual fight between agricultural and petroleum interests that’s deepened under Trump’s administration.

Later this month, the agency is expected to rule on as many as 34 petitions from 2018, according to three people familiar, who asked not to be named because the information isn’t public. The issuance of the waivers during the Trump administration is a lightning rod between biofuel advocates and independent oil refiners.

“You look at President George W. Bush, President Obama, and now President Trump, they’ve all wrestled with this and how to thread the needle,” said Chad Hart, a professor of agriculture at Iowa State University in Ames. “President Trump has had to dig in a little deeper, because when he was candidate Trump he courted both of these constituencies really hard. They both expect him to be more aggressive on it and therefore he has to be.”

EPA Administrator Andrew Wheeler is trying to balance the same warring biofuel and oil industry interests that ensnared his predecessor, Scott Pruitt. Last June, as scandals swirled around Pruitt, lawmakers with oil-industry interests bluntly warned they would seek his resignation if the EPA chief didn’t back off policy changes seen helping the biofuel industry. Pruitt backed down, but it was too late. He resigned under pressure days later.

Now, the same competing industries are squeezing Wheeler. During his January confirmation hearing, corn-state senators pressed him to swiftly finalize regulation allowing year-round sales higher-ethanol gasoline, and lawmakers from states with significant oil interests pushed back.

They intensified their pressure last month. Even as the Senate prepared to take up Wheeler’s nomination to be EPA administrator, five Republicans with oil interests warned that their confirmation votes hinged on whether he would take steps to help oil refiners forced to blend biofuel into gasoline. The lawmakers were assuaged after a flurry of meetings and phone calls with EPA officials offering unspecified assurances.

But Wheeler wasn’t in the clear. A week later, as the Senate prepared to hold a critical procedural vote on his nomination, Agriculture Secretary Sonny Perdue told lawmakers that an EPA rule change allowing year-round sales of higher-ethanol gasoline would not happen in time for the summer driving season. Such a delay would betray Trump administration promises to get the change finalized by then, when demand surges and restrictions kick in.

Although Perdue backtracked, the signal had already been sent. The biofuel industry and its allies in government were watching to make sure the EPA’s change happened on time.

‘Anger Someone’

Geoff Cooper, president of the Renewable Fuels Association, a Washington-based trade group, said the EPA needs to take a more judicious and “restrained’’ approach to issuing exemptions.
“What we’re expecting and hoping to see is those issues are going to be corrected by the current administrator,’’ Cooper told reporters on a conference call Thursday. “There are a lot of eyes on Mr. Wheeler today and a lot of scrutiny over how he is going to handle these petitions before him.’’

The U.S. Renewable Fuel Standard is a zero-sum contest between oil and biofuel, making it nearly impossible to satisfy both stakeholders simultaneously, said Stephen Brown, a refining industry lobbyist. “You anger someone no matter what you do.”

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