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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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Farmers Hit Hard As Trump Backs Big Oil

Donald Trump

The Trump administration seems to be leaning towards allying with the oil refining industry in its fight against Big Corn and federal rules requiring the use of corn ethanol.

Reuters reports that the U.S. EPA apparently granted an exemption to Andeavor, a large oil refiner, from having to comply with blending requirements as part of the Renewable Fuels Standard (RFS) last month. The RFS requires refiners to blend biofuels, such as corn ethanol, into their refined fuels. If they can’t or find it too costly, they are required to purchase credits.

The law dates back to 2007 under the George W. Bush administration, and is intended to cut crude oil demand and improve U.S. energy security. It has brought a windfall to corn country, although the environmental benefits have always been suspect.

The oil refining industry hates the law, because it forces them to pay for biofuels or pay for credits in lieu of blending ethanol into their fuel.

The latest waiver is notable because Andeavor is not in financial trouble, and could easily comply with the rules. The EPA gave the refiner an exemption at three of its smallest refineries, and as Reuters notes, it “marks the first evidence of the EPA freeing a highly profitable multi-billion dollar company from the costly mandates of the U.S. Renewable Fuel Standard.”

Typically, waivers are granted only in cases of financial hardship, and the move comes after a recent EPA decision to absolve Philadelphia Energy Solutions (PES), the largest refiner on the east coast, from some of its biofuels liabilities, which the company said helped force it into bankruptcy.

Related: Is This The Best Alternative To Lithium-Ion Batteries?

That move was significant, and it cracked open the door to potential changes in biofuels policy that the oil industry had long sought. The bankruptcy filing from PES sparked a heated battle between refiners and the ethanol industry. But the more recent exemption to a refiner that isn’t in a financial predicament is a whole different matter.

Politically, it is a tricky situation for the Trump administration. President Trump has counted both the oil industry and Big Corn as allies. He has hosted representatives from both industries at the White House to hash out a compromise, but has repeatedly kicked the can down the road. However, if the waivers are anything to go by, it now appears that the EPA is siding with refiners.

A 2017 lawsuit opened the door to a more lenient process to obtain a waiver from the EPA, Reuters reported. Since then, applications for waivers have spiked – more than 30 refiners have sought exemptions from biofuels requirements this year, compared to 12 to 15 in a typical year, Reuters says.

The biofuels industry is crying foul, arguing that the exemptions come with no legal justification, and that the exemptions themselves undermine the biofuels industry by significantly devaluing the market for biofuels credits. After Reuters reported on the Andeavor waiver, which seems to be the first report on the secretive exemption, the prices for biofuels credits fell by 6 cents, or more than 10 percent. Related: Houthi Missile Hits Saudi Oil Tanker

Industrial agriculture is now getting hit on two fronts by the Trump administration – the EPA is undermining the biofuels market, and Trump’s rapidly escalating trade war has resulted in Chinese tariffs on U.S. soybeans, a major U.S. export commodity.

It is no surprise that Iowa’s powerful Republican Senator Chuck Grassley is incensed. Granting Andeavor “a free pass when other companies are required to follow the law of the land isn’t just unfair, it may be illegal,” Grassley said in a statement to Reuters. “It would also amount to a massive government handout to a big corporation that made billions in profits just last year.”

It is unclear if Iowa and the ethanol industry can mount a defense. EPA Administrator Scott Pruitt has a long record of favoring the oil and gas industry, and the recent decisions in favor of refiners is consistent with that pattern. With President Trump unlikely to personally involve himself in this battle that has political costs either way, Pruitt’s EPA seems likely to set the tone.

By Nick Cunningham of Oilprice.com

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  • Tom on April 04 2018 said:
    Soon it will be planting season in the Midwest. Mr. President, Scott Pruitt and the EPA also seem to be busy planting seeds this spring. Come this fall there will be two harvests in the Midwest, one for the farmers and one for your Administration. The seeds the EPA is planting for you, may produce a crop you won't want to harvest this fall. The "Win-Win" that your Administration touted one month ago, must have ment Oil Wins and then Wins again and again and again. EPA doesn't seem to have any trouble writing up to 25 waivers for refineries to not comply with the RFS Law for the 2017 year. But try to get a waiver for E15 and higher ethanol blends to be sold year round, well, we'll have to study that, and study and study and study that, oh and by the way, it won't be ready for this summer! Mr. President, if you can't get the RVP Waiver for E15 and higher ethanol blends done by this summer then you may not have much of a harvest in the Midwest this fall.
  • Maria Z on April 05 2018 said:
    We should never have been burning FOOD products grown on precious, depletable soil that eople may one day need to eat and won't be able to use as OIL for our cars. It is absolutely unconscionable that Bush did this just to appease big donors. Thank goodness this president is doing the right thing even though it may not be politically expedient for him since the corn lobby is powerful in important swing states, couldn't be more proud of this brave and environmentally counscious move!
  • Steve on April 05 2018 said:
    This is truly good news! The ethanol mandate was always a political payoff to the farmers in the first state to participate in presidential politics every four years.

    It is about time this ethanol farce ended.
  • Daniel Pearson on April 05 2018 said:
    U.S. biofuels regulations are a complete scam approved in the period back when oil shot up to $160/bbl in June 2008. Anyone that knows about corn based biofuels realizes that it is a net loss energy process. Meaning that from initial creation of corn based biofuels to final shipment to the refineries via special tanker trucks since it is to corrosive to be piped to the refineries, the corn biofuel takes about 1.5 to 2 barrels of crude oil to make and ship an equivalent barrel of biofuel.
    Corn based biofuel is a political product, not an energy saving nor an energy renewable product since it takes more crude oil to make and transport the corn based biofuel than it saves. Do not even try to talk to folks who have engines from law mowers to cars to boats who have had to deal with the corrosive effects the corn based biofuel has on their combustion equipment and/or fuel lines and gaskets. Regards.
  • Louis on April 05 2018 said:
    Ethanol has always been a boondoggle. Fertilizer needed to produce corn pollutes our rivers and streams, it is a fools energy, nothing more than a political payoff to farmers. End the expensive, foolish fuel...
  • paul on April 05 2018 said:
    Hey New China, know when you run out of soy sauce and natural gas - we got what you need!

    Oh and we may not be able to pay you back your loan, thanks!
  • Tom on April 05 2018 said:
    Many of the comments about ethanol blended fuels are based on misinformation or very out of date information. Ethanol has many very positive aspects for improving our fuels, our air quality, our health and our environment. To trash ethanol based on misinformation would be a very big mistake. Several good websites to check out are,

    www.Fixourfuel.com

    www.ethanolrfa.org/consumers/why-is-ethanol-important/

    www.ethanol.org

    www.growthenergy.org

    I very much appreciate the author of this article for writing it.

    For me its not about oil or ethanol its about clean air and how do we get there. If we can't really rely on the EPA, (to busy writing waivers for oil refineries), or the Oil Industry, (to busy clawing for every gallon of market share), get us cleaner air, than the only real answer is Tesla. I have held on to my Tesla stock, because I don't see any real hope in the oil industry worrying about cleaner air and less cancer from our fuel supply.
  • Reggie on April 05 2018 said:
    Gotta love Grassley's hypocrisy: “It would also amount to a massive government handout to a big corporation that made billions in profits just last year.” Gee, just like the ethanol mandate itself, eh Senator?
  • Tom again on April 07 2018 said:
    Scott Pruitt's job security has come into question lately. Lots of unhappy people out there. Scott could probably use a few more friends. Something radicle Mr. Pruitt, phow about making the farm and ethanol people your friends for a change. Can't guarantee you would keep your job, but it certainly might help. It sounds like battle lines are being drawn and you could use all the friends you can get. Might check out the example of the Shrewd Steward in Luke 16: 1-8. Maybe some Wisdom there for you.
  • Ben Fulghum on April 07 2018 said:
    You dont use food as fuel! Period. By the way, propping up an industry (lets not even get into wind) is stupid. Also, ALCOHOL (calling it ethanol is a smokescreen for idiots) has far less energy quanta than oil. It also EATS HELL out of engines and fuel systems! You either design for one or the other. These greenie morons are KILLING poor and middle class! Both in cost of fuel and the subsequent teardown of the machines. (I.E. cars and other internal combustion engines.)
  • Tom Again on April 10 2018 said:
    Ben, I have used ethanol in all my vehicles for over 20 years with no mechanical problems. My 1989 Honda Civic had 320,000 miles on it, with no major repairs when I transferred it to a friend to use. My 2002 Yukon has 220,000 miles and I have never even changed the spark plugs. No mechanical problems there ethier. I would argue that it is actually the Oil Industry that is currently being "propped up", by the EPA, on a hand full of issues related to fuels, testing and emissions. To learn more about these issues you can go to www.fixourfuel.com
    One of the biggest "prop ups" for the oil industry is preventing E15 and higher ethanol blends from being sold in most of the US from June 1 to September 16th each year. This is a plumb to the oil industry to keep these competing ethanol fuels out of the heavy summer driving and profit season for the oil industry. I guess the EPA doesn't want the oil industry to have to "compete" with a cleaner, cheaper and higher octane fuels. And that's part of why big oil doesn't have to lower their fuel prices. Right now ethanol is about 50 cents per gallon cheaper than gasoline. It is even cheaper than gasoline on an "energy equivalent" basis, not to mention that ethanol has an octane rating of 113. Any wonder why big oil hates clean burning ethanol?

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