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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Trump’s Impossible Biofuel Dilemma

President Trump thought he had settled the issue. But farmers are irate once again.

Less than two weeks ago, Trump announced – with much fanfare – a revision to his administration’s biofuels policy, intended to patch up the badly damaged market for ethanol. In August, the EPA issued 31 waivers to oil refiners that got them out of their blending requirements for ethanol, a move that undercut the market for biofuels.

Facing a revolt, Trump scrambled to assuage anger in the Midwest. In the ensuing weeks, he negotiated with both sides to repair the damage.

After months of uncertainty, farmers cheered the October 4 proposal from the EPA, which promised to boost demand for ethanol next year. “So they should like me out in Iowa and all of the different places,” Trump said after the announcement.

On Tuesday, the EPA released the fine print on the proposal, setting off yet another firestorm. Less than two weeks ago, the Trump administration had promised that more than 15 billion gallons would be blended into the nation’s fuel mix, but the official proposal released Tuesday undercuts the impact.

For calculating the volume of ethanol that was exempted and therefore needs to be reallocated, the agency decided to use a three-year average based on what refiners should have been given exemptions for, rather than what they actually received. The details are arcane, but the bottom line is that ethanol groups say they were misled and that the calculation will undercount how much ethanol has been exempted away. Related: Oil Pirates: The Gulf Of Mexico’s Billion Dollar Problem

In other words, the boost to ethanol demand from the proposal will be much weaker than the EPA had let on in its announcement earlier this month. Ethanol futures plunged by more than 4 percent on Tuesday after the proposal was published, the sharpest decline in two months.

The backlash from farmers was swift. The National Farmers Union called it “another broken promise,” and said that family farms have been “burned too many times” by the Trump administration. “Again and again, the administration has made big promises to family farmers. And again and again, they have failed to deliver on those promises,” the group said.

The EPA said that the proposal would increase ethanol demand by 770 million gallons in 2020; ethanol groups said the agency’s initial announcement two weeks ago seemed to promise a demand increase of double that amount. “Only 11 days after President Trump’s landmark announcement, the EPA proposal reneges on the core principle of the deal,” said Iowa Renewable Fuels Association Executive Director Monte Shaw, according to Reuters.

As the FT notes, about 40 percent of America’s corn crop is funneled into ethanol. There is evidence to suggest that ethanol offers little to no climate benefit over conventional fuels, but environmental arguments aside, the industry is crucial to certain Midwestern economies, making the issue politically salient. Trump can ill-afford to lose farm country heading into 2020. Related: Higher Oil Exports Insufficient To Cut Brimming Venezuelan Stocks

“With each action they take related to ethanol policy, the current EPA is making Elizabeth Warren and Joe Biden more and more competitive in farm country,” President of Iowa-based Elite Octane, Nick Bowdish, told Newsweek.

But the oil industry is also unsatisfied. Oil refiners wanted the exemptions to remain in place and vowed to litigate against any EPA effort to reallocate ethanol requirements to other refiners. The weaker-than-expected EPA proposal didn’t do much to change that. The Fueling American Jobs Coalition, a group backed by refiners and setup to oppose ethanol blending requirements, said in a statement that the EPA proposal “runs counter to the law,” and would diminish “industrial jobs from Pennsylvania to Texas.”

While corn and ethanol groups called the EPA proposal a “broken promise” to farmers, the refining trade group used the same language, calling it a “broken promise to industrial workers.”

The mirroring language is a perfect illustration of how Trump can’t seem to find a way out of this predicament.

By Nick Cunningham of Oilprice.com

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