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Trump supports waiver for 15pc ethanol blend: Update

12 Apr 2018 20:48 (+01:00 GMT)
Trump supports waiver for 15pc ethanol blend: Update

Adds reaction.

Houston, 12 April (Argus) — President Donald Trump today said his administration would make it easier to sell 15pc ethanol gasoline blends year-round in most of the country.

Trump told governors and members of Congress gathered to discuss agriculture and trade that "we are going to go to 12 months, which makes a lot of farmers very happy." Air quality laws prohibit the sale of E15 for many markets during the peak summer driving months between June and September for most of the country.

The president offered "no guarantee" but said the administration would "probably" expand those sales while ensuring support for refineries obligated to ensure renewable fuels blend into the US fuel supply as required by the Renewable Fuel Standard (RFS).

"It was always unnecessary and ridiculous," Trump said of the restrictions. "But we are working on a transition now because there will be a two-year period of time that we have a little bit of complexity while things are happening, while things are being built."

Farm country representatives welcomed the discussion and biofuels groups were cautiously optimistic.

"The White House clearly understands that RVP relief will expand a growing market for America's farmers while letting consumers pick the fuel of their choice," Growth Energy Emily Skor said.

Sources familiar with the debate both in and outside the refining industry have questioned the executive branch's ability to make such a waiver stick. The allowance for higher Reid Vapor Pressure (RVP) — a measure of how easily the fuel evaporates — was inflexibly defined in statute more than 25 years ago for a 10pc ethanol blend.

An agency directive expanding the waiver would almost immediately be challenged and head to court for a judge's interpretation.

Environmental Protection Agency administrator Scott Pruitt told senators in January that he continued to study whether the agency had the legal authority to expand the waiver. The agency would likely propose any change to the waiver through a rule-making process that would involve an at least 30-day comment period.

Though discussed for months, it was not clear how soon EPA could issue such language.

"The agency has been awaiting a clear outcome from the ongoing RFS discussions with the White House, (agriculture department) and Congress before making any final decisions or developing any associated regulatory actions," an agency spokesperson said today.

Trump's remarks were the latest high-level development in more than five months of discussions involving the president on the future of the fuel mandates. The president has attempted to broker an agreement between agriculture groups seeking more demand for their commodities and refiners opposed to having to buy them. Trump's reference to a transition period appeared to echo proposals offered by refining proponents as part of those talks.

Discussions grew more urgent with a bankruptcy filing by Philadelphia Energy Solutions in January and again with concern that trade battles with China would depress demand and prices for US soybeans and corn.

"It is important to note that ag producers are suffering right now and they are looking at a downward cycle," US senator Deb Fischer (R-Nebraska) said after today's meeting. "So to be able to go back to Nebraska, go home and report to folks that exports are first and foremost in the president's mind, I think that is going to have a very positive effect on a lot of the uncertainty that is out there."

But both refiners and agriculture groups remained wary of the comments without further details.

Corn and biofuels groups referred to a record number of small refinery waivers to RFS obligations in statements welcoming year-round sales.

"We continue to work with the president and our elected leaders to protect the integrity and intent of the RFS from potentially damaging RIN price cap proposals and small refinery exemptions," Iowa Corn Growers Association president Mark Recker said.

An RVP waiver missed the broader, fundamental changes that the program needed, American Petroluem Institute (API) president Jack Gerard said.

"We are dealing with some of the, I would say, symptoms of the RFS," Gerard said. "The reality is that all that uncertainty is brought to us by one thing: a faulty, outdated Renewable Fuel Standard."

Negotiators participating in long-developing legislative efforts toward such changes, have held out the waiver as a carrot to entice biofuel support for other changes to the RFS. The fuel blending mandates requiring minimum volumes of renewables blend each year into the US transportation fuel supply provides demand for corn and soybean production used to generate biofuels. The program requires refiners, importers and other companies to acquire renewable identification numbers (RINs) generated by fuel blending to prove compliance. Refiners including Valero and PBF Energy have assailed the program as costs for RINs have climbed.

Senator John Cornyn (R-Texas), who said in March that his proposal to change the RFS was weeks away, could not be immediately reached for comment. US representative John Shimkus (R-Illinois), who was drafting a House version of legislation to change the program, said an executive waiver would not change that work.

"The Congressman believes that legislative efforts toward comprehensive, enduring reform of the RFS remain necessary and will continue regardless of an administrative RVP waiver," a spokesman said.