Biofuel plan faces fresh backlash from U.S. agricultural trade groups

[September 07, 2019]  By Chris Prentice, Stephanie Kelly and Jarrett Renshaw

NEW YORK (Reuters) - U.S. agricultural trade groups on Friday told the Trump administration a proposed biofuel reform package falls short of expectations, four sources familiar with discussions said, complicating plans the administration had for presenting the proposal to President Donald Trump.

Trump was expected to meet with Environmental Protection Agency and Department of Agriculture officials on Friday afternoon to discuss the proposal meant to assuage farmers angry about biofuel blending exemptions given to oil refineries, a separate source said. Trump has found himself in a political bind as he looks to appease two of his most prized constituencies – Big Oil and Big Corn - to again propel him into the presidency next year.

The proposed plan would include an increase to biofuels requirements for 2020 of 1 billion gallons (3.8 billion liters), sources said.

The plan already faced backlash during a conference call the USDA held early Friday with biofuels advocates to detail plans, sources said. The agricultural industry wants the administration to force larger refineries to make up for the exempted gallons through a process called "reallocation," but it has not committed to that yet, the sources said.

"Plants are closing now. Farmers are going bankrupt now. The biofuel industry made it clear that restoring the exempted gallons by 2020 is the only way to stop the bleeding," said a biofuel source familiar with the call. "Anything short of that is going to face united opposition, which means the president won't want to show his face in Iowa."

The meeting on Friday afternoon was initially expected on Thursday evening but was pushed back, a source said. The White House declined to comment for this story.

Trump has promised to deliver a "giant package" to U.S. farmers related to ethanol, in response to ire from U.S. farmers and biofuels advocates over 31 exemptions regulators have given to oil refineries to free them of requirements to blend biofuels.

Biofuels advocates, including Republican senators Chuck Grassley and Joni Ernst from Iowa, weighed in on the issue on Twitter on Friday.

"Know this @EPA and @USDA: the only good deal for Iowa farmers is one that upholds the intent of the RFS," Ernst said.

President Donald Trump stands in the Oval Office during a presentation of the Presidential Medal of Freedom to NBA Hall of Famer Jerry West at the White House in Washington, U.S., September 5, 2019. REUTERS/Joshua Roberts

The Renewable Fuel Standard (RFS) requires refineries to blend increasing volumes of biofuels into their fuel each year. Small facilities under financial strain can be exempted, and Trump authorized the EPA to grant 31 waivers to small refineries in August, far more than the Obama administration had typically granted.

The draft plan under consideration would include a previously discussed increase of 500 million gallons for conventional biofuels, largely corn-based ethanol, as well as an additional 500 million gallons for advanced biofuels like biodiesel for 2020, sources said. It would also include an addition to the biodiesel mandate for 2021 of 250 million gallons.

That increase would help address "excess waivers," which have also harmed biodiesel and soy farmers, according to a document seen by Reuters that details the proposal.

An EPA spokesperson declined to confirm or comment on the plan on Thursday but said the agency will continue to consult on the best path forward for the program.

The latest proposal has already drawn criticism from the oil industry.

Additionally, officials at companies including Ergon Inc, Sinclair Oil Corp and San Joaquin Refining Co Inc wrote in a letter to Trump on Friday that small refineries that demonstrate economic hardship created by compliance costs are entitled to an exemption.

West Virginia legislature leaders sent a joint letter on Friday to the White House, saying, "We fear the Administration may lose sight of the importance of protecting small refineries which are critical to the U.S. energy infrastructure and the manufacturing jobs they provide throughout the country."

Since the waivers were granted, farmers and biofuel producers have voiced swift opposition. A coalition of labor unions that supports the biofuels industry sent a letter on Friday to EPA Administrator Andrew Wheeler, urging the administration to stop issuing excess waivers.

(Reporting by Chris Prentice, Stephanie Kelly and Jarrett Renshaw; Editing by Tom Brown and Marguerita Choy)

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