Trump disappoints fossil fuel proponents and Corn Belt base as EPA leaves biofuels program mostly unchanged

Key Points
  • President Donald Trump's Corn Belt base and fossil fuel supporters both expressed disappointment over federal biofuels standards.
  • The EPA left the Renewable Fuel Standard little changed on Thursday.
  • The biofuels industry and heartland lawmakers hoped for an increase, while oil interests and conservative think tanks want the program to be scrapped.
A farmer unloads harvested corn in Marshall, Missouri.
Patrick T. Fallon | Bloomberg | Getty Images

Faced with competing demands from two pillars of President Donald Trump's base, the Environmental Protection Agency left a controversial renewable fuel program largely unchanged — and neither side of the long-burning debate fully satisfied.

America's Corn Belt and fossil fuel proponents are unlikely to drop their support for Trump over the decision, but both groups expressed disappointment over the announcement.

The resolution shows how Trump, who has rapidly plowed through much of his energy agenda, may find it harder to chalk up decisive wins as the administration considers tackling tougher battles with entrenched interests.

The EPA's announced renewable volume obligations fall short of the full potential of the U.S. biofuels industry. That is disappointing.
Sen. Chuck Grassley

At issue this week was the Renewable Fuel Standard, a program that requires refiners to blend an increasing amount of renewable fuels such as corn-based ethanol into traditional fuels such as gasoline.

On the campaign trail, then-candidate Trump vowed to protect the program, which is popular in the agricultural areas he mostly won over. But as a president championing fossil fuel development, Trump's EPA floated the idea of scaling back the program earlier this year.

On Thursday, the EPA decided to require refiners to blend 19.29 billion gallons of renewable fuels in 2018, up from 19.28 billion gallons this year. The agency slightly upped the requirement for advanced biofuels, but left the conventional biofuels requirement for 2018 and the biodiesel mandate for 2019 unchanged.

The Renewable Fuel Association, a biofuels industry group, said it was pleased EPA didn't scale back the levels, but argued the Renewable Fuel Standard needs to be a "forward-looking program" to drive investment in new technologies.

"The biofuels industry will rise or fall together, and thus we are disappointed the final rule is not more aggressive with regard to other advanced biofuels such as biodiesel," RFA President Bob Dinneen said in a statement.

Similarly, Iowa's senior Republican Sen. Chuck Grassley said he was glad that EPA dropped its earlier proposal, but had hoped for higher blending levels.

"The EPA's announced renewable volume obligations fall short of the full potential of the U.S. biofuels industry. That is disappointing," he said in a statement.

Grassley and Sen. Joni Ernst, the junior Republican from Iowa, were among several midwest lawmakers who threatened to hold up Trump's EPA nominees if he scaled back the Renewable Fuel Standard.

Trump EPA 'caved'

Meanwhile, conservative free-market think tanks that are deeply skeptical of climate change and influential in the halls of Trump's White House lamented Thursday's decision.

Marlo Lewis, senior fellow at the Competitive Enterprise Institute, accused the EPA of caving to pressure from lawmakers like Ernst.

"Although utterly trivial in economic terms, the miniscule [sic] increase is a political victory for those whose regulatory rents and campaign contributions depend on the piratical dogma that, regardless of market conditions and consumer preference, biofuel producers are always entitled to squeeze more dollars out of motorists at the pump," he said in an email to CNBC.

Isaac Orr, research fellow for energy and environment policy at The Heartland Institute, said the decision was unsurprising given the senators' threats.

"I think they wanted to pick their battles and they thought that this wasn't worth fighting over," he said.

US Attorney subpoenas Carl Icahn and his firm on biofuel activities
US Attorney subpoenas Carl Icahn and his firm on biofuel activities

Scrapping the Renewable Fuel Standard is one of the priorities the Heartland Institute promoted at a recent conference in Houston held to celebrate and take stock of Trump's energy agenda. That goal is shared by many in the industry.

The American Petroleum Institute on Thursday said EPA Administrator Scott Pruitt is being forced to implement a broken Renewable Fuel Standard that needs reform.

Last month, CVR Energy CEO Jack Lipinski said Trump had "failed to drain the swamp as promised" by backpedaling on efforts to reform the program, one of which was proposed by former Trump regulatory advisor and top CVR shareholder Carl Icahn.

An EPA spokesperson declined to comment on the responses but pointed CNBC to Pruitt's statement on Thursday.

"Maintaining the renewable fuel standard at current levels ensures stability in the marketplace and follows through with my commitment to meet the statutory deadlines and lead the Agency by upholding the rule of law," Pruitt said.