(Bloomberg) -- President Donald Trump’s decision to defend the U.S. government’s power to broadly exempt oil refineries from biofuel-blending requirements is triggering a backlash in Iowa and other states that are top producers of ethanol and the corn used to make it.
Nine biofuel and agriculture advocacy groups warned of possible political repercussions, eight months before Election Day. And the Iowa Democratic Party immediately seized on Trump’s plans to launch a blistering attack on Republican Senator Joni Ernst, who’s running for re-election.
If the administration follows through with plans to appeal a court ruling that invalidated three refinery waivers, it “would be viewed as a stunning betrayal of America’s rural workers and farmers,” the Renewable Fuels Association, National Farmers Union, National Biodiesel Board and other organizations said in a joint statement.
“We cannot stress enough how important this decision is to the future of the rural economy and to President Trump’s relationship with leaders and voters across the heartland,” they said.
The anger centers around the administration’s planned response to a 10th Circuit Court of Appeals decision faulting the Environmental Protection Agency for exempting three refineries from requirements to blend biofuel into gasoline and diesel. Federal law authorizes those waivers for small refineries facing an economic hardship, but a three-judge panel said that relief is limited to refineries that have consistently won exemptions.
And producers of corn-based ethanol and soybean-based biodiesel argue the Trump administration too freely handed out the waivers, undermining a 15-year-old Renewable Fuel Standard law that mandates the use of plant-based alternatives to gasoline.
Top Trump administration officials had been planning to accept the ruling and apply it nationwide, a move that would mean just a handful of U.S. refineries -- no more than seven -- would be eligible for the valuable exemptions.
But Trump ordered a shift in course Thursday, after a last-minute intervention by Attorney General William Barr and an intense pressure campaign by oil-state senators, including Texas Republican Ted Cruz.
Biofuel advocates were urging the White House to make another pivot on Friday and back down from the planned appeal, ahead of a Monday legal deadline for the administration to ask the full 10th Circuit to rehear the case. The Trump administration has vacillated on biofuel policy decisions in the past, raising the possibility of yet another change in course.
An appeal would be a victory for oil companies and their Capitol Hill allies, who argued the waivers are essential to preserve the economic health of refineries and their blue-collar jobs, especially amid a coronavirus-spurred slump in demand for their petroleum-based products. Oil industry advocates raised the specter of job losses and plant closures in Wyoming, Texas and the political battleground state of Pennsylvania.
But the appeal decision would come at the expense of biofuel producers and supporters in other politically important states -- especially Iowa, which is key to Trump’s re-election. Trump launched a campaign blitz in Iowa two months ago, as he sought to shore up support in the Hawkeye State he won by 9 percentage points in 2016. A repeat Trump victory isn’t guaranteed; Iowa voted for Barack Obama in the presidential contests in 2012 and 2008.
“Trump is on the verge of outraging every farm and biofuel group in the country,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “We could have had a fairly uneventful year for RFS policy heading toward November, but this action would seriously threaten Trump’s reputation in rural states.”
The administration’s strategy is “a needless political error that will come back to haunt the president and every one of his allies on the ticket in Midwest states,” said former Senator Jim Talent of Missouri, co-chair of the pro-biofuel group Americans for Energy Security and Innovation. “The president needs to think about the millions of farmers and biofuel workers in swing states, where another farm bailout is not going to bring back the economy.”
Into the Fray
The Iowa Democratic Party joined the fray Friday, issuing a news release that tied Ernst -- a relentless advocate of biofuels -- to Trump’s decision. “The administration’s refusal to uphold the RFS has forced Iowa communities to the brink, but all Senator Ernst has to offer are toothless press releases to try to save face,” said Jeremy Busch, Iowa Democratic Party spokesperson.
Representatives of Ernst’s reelection campaign didn’t immediately comment.
Oil industry advocates have argued that anything less than an appeal would be legal malpractice because the 10th Circuit’s ruling clashes with federal law that says refineries may seek relief “at any time,” conflicts with longstanding EPA practice and is at odds with a separate ruling by the 4th Circuit. A separate challenge of other refinery waivers is also pending in the D.C. Circuit Court of Appeals.
The administration’s appeal plan won praise late Friday from 10 Republican senators, including Cruz, Jim Inhofe of Oklahoma and John Barrasso of Wyoming -- one of the six states covered by appeals court.
Jobs at Stake
“We’re encouraged by the reports that the administration will appeal the Tenth Circuit’s decision on small refineries,” the senators said. “Thousands of blue collar workers’ jobs are at stake if the ruling were to stand. We’re grateful for President Trump’s commitment to the hardworking men and women of small refineries, and look forward to working with the administration to ensure follow through on the President’s decision.”
Dramatically curtailing exemptions would likely spur more demand -- and higher costs -- for renewable identification numbers, the credits refiners use to prove they have fulfilled biofuel-blending quotas. The price of RINs tracking consumption of conventional renewable fuels, including ethanol, had already climbed as much as 158% since the Jan. 24 court ruling on expectations fewer waivers would be issued.
The Fueling American Jobs Coalition of small retailers and independent refiners underscored “the president’s promises to reduce RINs prices and protect refinery workers.”
“EPA’s decision avoids a self-inflicted wound,” the group said. “Failing to assert legal remedies and failing to announce adequate cost containment for RINs would have created unacceptable political and economic fallout squarely on EPA’s watch.”
Analysts said an appeal is not universally bad news for biofuels, with Height LLC noting it sets the stage for the EPA to scale back refinery relief this spring, by issuing partial waivers instead of complete exemptions. “In the president’s impossible but never-ending quest to find a win-win solution on the RFS, partial 2019 waivers would seem to be a modest concession to farm country for the appeal,” Height said in a research note for clients Friday morning.
(Updates with senators, refining coalition from 17th paragraph)
--With assistance from Mario Parker and Jennifer Jacobs.
To contact the reporter on this story: Jennifer A. Dlouhy in Washington at firstname.lastname@example.org
To contact the editors responsible for this story: Jon Morgan at email@example.com, Elizabeth Wasserman, Ros Krasny
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.