Trump will order changes in biofuel rules in bid to end feud between farm states and oil refiners

Key Points
  • President Trump ordered acting EPA Administrator Andrew Wheeler to start the process of lifting a summertime ban on the sale of E15, a type of gasoline-biofuel blend, according to a senior White House official.
  • Sales of the biofuel are currently blocked from the beginning of June through the middle of September because the blend does not meet ozone standards spelled out in the Clean Air Act.
An oil well sits in the middle of a corn field near Norris City, Illinois.
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The Trump administration will seek to reform two parts of the nation's policy to promote biofuels, marking its latest attempt to reach a mutually beneficial outcome for two of the president's key constituencies: the fossil fuel industry and farm states.

President Donald Trump on Tuesday ordered acting EPA Administrator Andrew Wheeler to take measures that would lift barriers to the summertime sale of E15, a type of gasoline-biofuel blend, according to a senior White House official. The change is calculated to shore up demand for biofuels such as corn-based ethanol and boost the fortunes of farmers.

Regulations effectively restrict the sale of E15 from the beginning of June through the middle of September at gas stations throughout much of the country.

At the same time, the Trump administration will aim to limit speculation in the market for biofuel credits, the official told reporters Monday. The nation's refiners have long complained that the obscure market is flawed, resulting in price spikes that drive up the cost of complying with federal rules and putting financial pressure on small refineries.

Both issues fall under the nation's Renewable Fuel Standard, a 2005 program that requires American refineries to blend biofuels into transportation and heating fuel. The program was designed to reduce U.S. dependence on foreign fossil fuels, cut pollution and greenhouse gas emissions and bolster the domestic biofuel industry.

Trump has walked a tightrope on the issue throughout his presidency. His Environmental Protection Agency has angered farm states by granting more waivers than usual to small refineries, denting demand for biofuels. Meanwhile, refiners have been disappointed by the EPA's refusal to cut the amount of biofuel they're required to blend into gasoline and diesel.

Trump informed Iowa senators of his decision on E15 sales on Tuesday before headlining an evening rally in Council Bluffs, Iowa.

"As the nation's leader in renewable fuels production, today's action is especially exciting for Iowa," Ernst said in a statement. "Granting the sale of E15 year-round will mean that Iowans will see an increase in farm income, increased ethanol production and consumption and a boost in our economy.

Ethanol industry trade group the Renewable Fuels Association, applauded the decision to allow year-round E15 sales.

"Securing fair market access for E15 and other higher blends has been our top regulatory priority for several years, and we are pleased that the first official step in this process is being taken. When markets are open and competitive, American consumers win," RFA President and CEO Geoff Cooper said in a statement.

The American Fuel and Petrochemical Manufacturers, however, called the proposal "ill-conceived" and "unlawful."

"We are disappointed to see that despite good-faith efforts by refiners to find potential solutions, the Administration has unilaterally embraced a one-sided approach that only serves the ethanol community, which has shown little interest in finding common ground," Chet Thompson, president and CEO of the trade group said in a statement.

The Competitive Enterprise Institute, a conservative free market think tank, asserted that allowing E15 sales during summer months is unlawful under the "plain language" of the Clean Air Act.

"An unlawful sop to the corn lobby at the expense of consumers is no way to drain the swamp. President Trump should reconsider this ill-advised move," said Marlo Lewis, senior fellow at CEI.

The senior White House official said the White House believes issuing a waiver would survive legal scrutiny. According to the official, the action is "directed at increasing the supply of biofuels and providing consumer choice and is in line with the president's free market approach to the energy market." Asked about potential lawsuits, the official .

Tackling trade in biofuel credits

The administration will also start the federal rule-making process to address the energy industry's concerns about the market for biofuel credits, the official said.

Refiners generate the credits — known as Renewable Identification Numbers, or RINs — when they blend biofuels into gasoline. Refiners that aren't able to blend biofuels must purchase RINs from their competitors.

New regulations under consideration include limiting trading in the credits to refiners and fuel importers, the official said. That would cut out traders who are not linked to refining businesses but are allowed to trade in RINs. Refiners often blame these traders for wild price swings that can raise the cost of compliance for small refineries.

RINs prices were particularly volatile last year. Analysts say Trump's decision to appoint the billionaire investor Carl Icahn as a regulatory advisor . Icahn holds a majority stake in refinery operator and sought changes to biofuels rules that would benefit refiners, but the administration did not adopt his ideas.

Sens. Grassley and Ernst rejected Cruz's proposal to cap RINs prices following a White House meeting in February.