EPA issues raft of refinery waivers, angering King Corn

We’ve been tracking the ongoing battle between the ethanol lobby and the oil and gas industry for a while now, with the President seemingly caught in the middle. Earlier this year, King Corn won a major victory when President Trump’s EPA approved year-round sales of E15 gasoline over protests from environmentalists and motorists. Perhaps the President is still trying to keep both sides happy (a seemingly impossible task) because the EPA has now turned around and granted an item on the oil refinery states’ wishlist. Waivers have been granted to nearly three dozen smaller refineries, exempting them from the onerous ethanol blending mandates found in the Renewable Fuel Standard (RFS). Needless to say, the ethanol lobby is less than pleased. (Reuters)

The U.S. Environmental Protection Agency is expected to announce its 2018 small refinery waiver decisions on Friday, two sources told Reuters, and is seen granting 30 exemptions from the nation’s biofuel laws out of the 38 pending petitions.

The small refinery exemption program has emerged as a battlefield between the rivaling oil and corn industries as the Trump administration had come under intense criticism for granting too many waivers. The decisions have been awaited for months by both industries.

Renewable Fuel Association (RFA) President and Chief Executive Geoff Cooper called the decision “reprehensible” and blamed Trump for ethanol plants being shuttered in the midwest. That’s not surprising since the RFA is the biggest lobbying group supporting ethanol mandates in the world. They’re constantly pushing to rapidly expand the RFS rather than curbing it as is needed.

The two realities we are dealing with here keep the industries at odds, leaving the White House caught in a game of tug of war. The first of these truths is that the majority of the market for ethanol is completely artificial. There is virtually no measurable demand for more ethanol (or any ethanol for that matter) in gasoline among drivers. The only reason so much of it gets produced is that the federal government forces the use of the poor quality fuel through mandates.

The second reality is that smaller, older oil refineries don’t have the capability to blend ethanol into gasoline as required. Modifying them to make that possible would be prohibitively expensive. And forcing them to purchase Renewable Identification Number (RIN) credits as a punishment for not blending has already bankrupted one refinery in Pennsylvania and threatens to do the same to others.

The White House has made a good start by approving this many waivers, but more work remains. Unfortunately, the politics behind all of this are poisoning the process. President Trump doesn’t want to anger the farmers in Iowa because of their strategic position in national elections. (He really doesn’t need to worry about that anymore, but he’s sticking to the promise he made.) But at the same time, he can’t afford to tick off refinery-heavy states like Pennsylvania and Texas. So at least until the next election, we will likely be stuck in the middle of this food fight.