Trump, eyeing Farm Country, starts working on ethanol industry's year-old wishlist

[September 24, 2020]  By Stephanie Kelly and Jarrett Renshaw

NEW YORK (Reuters) - President Donald Trump, looking to shore up support in the U.S. Farm Belt during a tight race for re-election, is taking steps to help producers of corn-based ethanol using a list of policy goals that a group of Midwest senators discussed with him a year ago, according to two sources familiar with the matter.

On Sept. 12, 2019, Trump met with the senators, who were frustrated by the administration's management of U.S. biofuels policy. They argued that Trump's Environmental Protection Agency had been helping the oil industry at the expense of farmers dependent on ethanol sales, and presented him with a list of ways he could fix the problem, according to five sources familiar with the matter.

Following that meeting, Trump announced progress had been made on a biofuel reform package, but gave no details. "I think we had a great meeting on ethanol for the farmers," Trump told reporters at the White House. "Let's see what happens."

A year later, Trump and his administration have begun chipping away at the industry's wishlist, using the meeting as a blueprint to court his crucial Farm Belt constituency in what is expected to be a tight contest with Democratic rival Joe Biden, according to the sources.

The 2019 meeting, which included senators Chuck Grassley and Joni Ernst from Iowa and senators John Thune and Mike Rounds from South Dakota, produced a list of 11 policy items, according to one of the sources and a memo from the meeting reviewed by Reuters.

They included ratcheting down the EPA's biofuel waiver program exempting refineries from adding ethanol to their gasoline; setting higher biofuel blending volume requirements for 2020; expanding the market for higher ethanol blends of gasoline called E15; exploring a national biofuels infrastructure program; and addressing ethanol and biodiesel trade issues, particularly with Brazil, according to the memo - the details of which have not previously been published.

In recent weeks, Trump has moved on some of these goals, using them as a battle plan for his election strategy in the Midwest, according to two sources.

The White House and the U.S. Environmental Protection Agency, which regulates compliance with biofuel requirements, did not comment for this story.

First, Trump's EPA this month denied scores of retroactive small refinery waivers that would have allowed more than a dozen refining facilities to continue seeking exemptions from RFS obligations each year. The biofuels industry saw the move as a step toward winding down the controversial waiver program, a key point of discussion during the 2019 meeting.

Trump also urged Brazil to continue its policy of not imposing tariffs on imported ethanol, asking Brazilian President Jair Bolsonaro's government to eliminate any levies. Brazil since announced it will extend a tariff-free import program for biofuels until after the election.

Load out technician Slade Whetro fills a railroad tank car with ethanol fuel, converted from corn, at the Lincolnway Energy plant in the town of Nevada, Iowa, December 6, 2007. REUTERS/Jason Reed (UNITED STATES)/File Photo

Then on Sept. 12, exactly one year after the meeting with senators, Trump tweeted he would allow states to permit fuel retailers to use their current pumps to sell E15 gasoline instead of installing new equipment, a move that could help lift ethanol sales quickly.

With the election looming, Trump had been under increasing pressure from within his campaign to please agriculture interests, and Midwest lawmakers and agricultural trade associations had been reminding Trump of his slow action on the 2019 wishlist up to that point.

"(In August) we turned up the message that it's been a year, nothing has happened, and people are getting mad about it," said one of the sources.

"The meeting was highly influential," another source familiar with the matter said. "It was the administration getting a chance to hear from states firsthand."

The administration's moves reflect the political importance of ethanol. Laws surrounding the corn-based fuel carry a lot of weight for biofuel producers and farmers, a constituency that helped carry Trump to a narrow victory in the 2016 election.

Biden's campaign and Senate Democrats had noticed farmers' frustration with Trump and had attacked him for not holding to his commitments.

Even so, several items on the ethanol industry wishlist remain, along with new uncertainties creating angst in the Farm Belt. Biofuel interests want assurances, for example, that 2020 blending requirements will be enforced despite the fact the coronavirus pandemic has slashed fuel demand.

They also want the Trump administration to announce its proposed biofuel blending volume mandates for 2021, and make final decisions on all outstanding small refinery exemption applications under consideration by the EPA.

(Reporting by Stephanie Kelly and Jarrett Renshaw; editing by Richard Valdmanis and David Gregorio)

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