Background

Earlier this month, Reuters writers Stephanie Kelly and Jarrett Renshaw reported that, “U.S. Environmental Protection Agency Administrator Andrew Wheeler told a biofuels company on [December 5th] that the agency is working to address industry concerns over biofuel blending rules that have sparked outrage across the Farm Belt, according to a source familiar with the matter.

“Biofuel producers and representatives of corn farmers are unhappy with the EPA’s expanded use of waivers exempting oil refineries from their annual ethanol blending requirements. They say that agency’s efforts to address the issue with proposed tweaks to the 2020 blending requirements are not enough.

Feed Outlook / FDS-19l / December 12, 2019 Economic Research Service, USDA.

“The EPA plans to send the proposed 2020 blending mandates to the White House’s Office of Management and Budget for approval by the end of the week, according to two sources familiar with the matter. It is not clear whether that plan will include any changes since the agency unveiled the proposal in October.”

And last week, Stephanie Kelly reported at Reuters that,

U.S. Senator Chuck Grassley said on [December 10th] he has been assured by the White House that 2020 biofuel blending mandates will be finalized in accordance with a September agreement between the administration and biofuel and corn producers.

Ms. Kelly explained that, “In September, the Trump administration came to an informal agreement with the ethanol industry and its backers to adjust refiner quotas higher in 2020 to make up for the EPA’s recent expanded use of waivers exempting some smaller facilities under financial strain from their blending obligations.

“But in October, after pushback from the oil industry, the EPA unveiled a proposal that contained some differences that biofuel producers said amounted to a betrayal of the September agreement.”

Latest Developments

With this background in mind, Bloomberg writer Jennifer A Dlouhy reported this week that, “The Trump administration on Thursday set relatively flat quotas for plant-based fuels in 2020, rebuffing ethanol and biodiesel allies who said the targets don’t do enough to support the industry.

“The Environmental Protection Agency will require refiners to use 20.09 billion gallons of renewable fuel in 2020, a 0.85% increase over the 2019 requirement for 19.92 billion gallons, largely tracking a proposal released in July.

The agency is also sticking with its plan for adjusting blending requirements to offset waivers exempting some refineries from the mandates, despite criticism from biofuel allies in politically important farm states that the approach is inadequate.

The Bloomberg article noted that, “EPA officials say that with those adjustments, the agency’s plan effectively lays out a 2020 target for 15.8 billion gallons of conventional renewable fuels, including corn-based ethanol, with that translating to 15 billion gallons once refinery waivers are factored in. A senior EPA official said the strategy allows the agency to better ensure targets are actually met while still giving small refineries relief from the requirements when appropriate.”

Ms. Dlouhy stated that, “Under the EPA rule, refiners are expected to use 5.09 billion gallons of advanced biofuel, including 590 million gallons of cellulosic biofuel. And in 2021, refiners and fuel importers will be required to use 2.43 billion gallons of biomass-based diesel made from soybeans and waste cooking oil — identical to the 2020 target.”

“For weeks, biofuel producers, farmers and politicians from the U.S. Midwest unsuccessfully implored administration officials — including President Donald Trump himself — to alter the EPA’s approach so that it better assures biofuel quotas aren’t undermined by refinery waivers. They say the EPA measure falls short by basing adjustments on a three-year average of Energy Department recommendations on those refinery waivers — rather than the higher number the EPA has actually granted,” the Bloomberg article said.

“The proposed adjustments in the notice designate that this three-year rolling average will be based on the relief recommended by the Department of Energy, not on actual exemptions granted. This is a key point of contention for the industry as there is often a disconnect between how many gallons are recommended by DOE to exempt through full or partial exemptions and what the actual exemptions end up being. Simply put, DOE recommended a lower number of RVOs be exempted by EPA, EPA disregarded that and exempted a larger number of RVOs. EPA then proposed to account for the actual lost gallons by using the lower DOE numbers it had already rejected, resulting in a certain creative irony.” (“EPA’s Small Refinery Waiver Proposal Is an Unbalanced Approach for Agriculture,” American Farm Bureau Federation (October 21, 2019- https://bit.ly/32Tat5w).

DTN Ag Policy Editor Chris Clayton reported on Thursday that, “Biofuel advocates simply wanted EPA to offset its annual volume of small-refinery exemptions by requiring other petroleum refineries to pick up any volume of gallons that were granted as exemptions. Instead, EPA came up with a three-year-average plan the leaves uncertainty over whether 15 billion gallons of biofuels are actually used.

“EPA, though, maintains its plan keeps to the president’s promise made last fall. Under the plan, EPA is using a three-year methodology based on how the agency granted small-refinery exemptions for the years 2016-2018. EPA noted the Department of Energy had recommended 770 million gallons of small-refinery relief during that time. EPA will use this three-year average volume calculation from now on to grant small-refinery exemptions for 2019, 2020 and beyond.”

Donnelle Eller reported on Thursday at The Des Moines Register Online that,

Instead of using a three-year rolling average of the actual gallons waived for refineries, EPA will use an average of the gallons that the Energy Department recommends waiving, which has been significantly less since 2016.

“‘Apparently President Trump doesn’t care about his promise to Iowa’s farmers,’ said Jim Greif, a Monticello farmer who is the Iowa Corn Growers Association board president. ‘He had the opportunity to tell his EPA to stick to the deal that was made’ in September.”

Several lawmakers, as well as Iowa GOP Governor Kim Reynolds, expressed displeasure with the EPA announcement on Twitter: