Trump Courts Iowa Farmers With Plan to Scrap Biofuel Waivers

(Bloomberg) -- Trump administration officials have told ethanol advocates the government will reject requests by refineries to be waived from renewable fuel-usage requirements -- a bid to reinforce the president’s support in key swing states of Iowa, Wisconsin and Minnesota.

The Environmental Protection Agency could reject as many as 67 of those retroactive waiver requests as soon as this week, according to four people familiar with the matter who asked not to be named prior to an announcement.

The planned move would follow another announcement that disappointed the oil industry and was aimed at shoring up support in a battleground state. Trump signed a presidential order on Tuesday to block offshore oil development near Florida, as well as Georgia and South Carolina.

The refinery waivers have been the subject of intense lobbying by Iowa ethanol producers and politicians, including Republican Senator Joni Ernst, who is in a tight race for re-election.

In 2016, Trump won Iowa by 9.4 percentage points but now leads challenger Joe Biden by just 1.7 percentage points in the state, according to a RealClearPolitics average of recent polls. Iowa ethanol supporters warned the administration last month that without action, the state’s six electoral votes “hang in the balance.”

The decision was reported earlier by Reuters.

Pacific Ethanol Inc. shares jumped as much as 18% on Wednesday to $4.90, while Green Plains Inc. climbed as much as 6.2% to $13.96, and Renewable Energy Group Inc. increased as much as 16% to $44.42.

Shares of commodity trading giant Archer-Daniels-Midland Co. and crop handler Andersons Inc. also rose.

Refineries filed dozens of applications with the EPA seeking retroactive waivers from the biofuel-blending requirements dating back to 2011. The tactic followed a January federal court ruling that said the relief was limited to facilities that have consistently received exemptions.

Federal law authorizes the EPA to grant the exemptions for small refineries that can prove they are facing a serious economic hardship complying with the biofuel-blending requirements.

Administration officials have not yet decided whether to reject a separate batch of 28 pending requests tied to 2019 biofuel quotas, two of the people said.

Biofuel policy divides Trump’s political base -- often pitting refiners in Texas and Pennsylvania against ethanol producers in the Corn Belt. The lines are blurring as more oil companies convert facilities to produce biofuels and sell the credits that track industry compliance with the annual mandates.

Refiners warned Wednesday that the move could backfire.

“It would be a mistake and a further undoing of his energy dominance agenda for the president to turn his back on small refineries in yet another attempt to appease Iowa ethanol groups,” American Fuel and Petrochemical Manufacturers president Chet Thompson said by email.

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