U.S. Markets closed

White House Sides With EPA After USDA Objections on Biofuel

Jennifer A. Dlouhy

(Bloomberg) -- Administration officials warned that an EPA plan for boosting biofuel-blending requirements violated the spirit of a deal brokered by President Donald Trump.

The White House blessed it anyway.

The back and forth is revealed in newly released documents from a White House review of the Environmental Protection Agency’s biofuel proposal before its public release Oct. 15.

The documents, uploaded to a government regulatory docket late Monday, show the U.S. Department of Agriculture initially argued the plan was inconsistent with an earlier White House promise to ensure “more than 15 billion gallons” of conventional biofuel, such as ethanol, are required to be blended into the nation’s fuel supply beginning in 2020.

The documents shed light on a last-minute fight between the EPA and the USDA that briefly delayed the proposal’s release. Ultimately, the EPA’s approach prevailed, with both agencies signing off on the measure and the White House Office of Information and Regulatory Affairs authorizing its release, according to a senior administration official.

The USDA’s initial complaints mirrored those of ethanol and biodiesel industry advocates, who have blasted the EPA’s formal proposal as a bait and switch. “This is not what we agreed to,” Monte Shaw, head of the Iowa Renewable Fuels Association, said last week.

At issue is an Oct. 1 agreement to raise biofuel-blending requirements and offset EPA waivers exempting some small refineries from the mandates. When the administration outlined the deal on Oct. 4, the EPA said it would seek public comment on ensuring more than 15 billion gallons of conventional ethanol are blended into the nation’s fuel supply beginning in 2020.

However, the EPA’s formal proposal to codify the deal, released a week and a half later, raises the possibility that planned increases in biofuel-blending requirements will not be high enough to offset refinery waivers, effectively undercutting the 15-billion-gallon target. The reason is that EPA based its adjustment on a lower possible total -- Energy Department recommendations for waivers that were sometimes disregarded -- instead of higher levels EPA actually granted in recent years. The EPA also signaled it would shift practice to more closely abide by those Energy Department recommendations going forward.

The Agriculture Department initially pushed -- unsuccessfully -- for the EPA to offer a second proposal based on actual waivers, according to the newly released documents and a person familiar with the matter.

During OIRA’s review, the EPA resisted making changes to address to the Agriculture Department’s concerns, citing the principals’ agreement reached earlier. It also defended its approach, with the agency saying it was proposing a methodology for estimating exemptions while also stating its intention to “follow the same methodology” in granting them going forward.

Ultimately, the USDA dropped its objections, after EPA Administrator Andrew Wheeler and Agriculture Secretary Sonny Perdue spoke about the issue, according to the senior administration official and another person familiar with the matter. Both asked to speak anonymously about the private negotiations.

That Office of Information and Regulatory Affairs is meant to resolve interagency disputes and policy concerns, noted Amit Narang, a regulatory policy advocate with the watchdog group Public Citizen. “But here,” he said, “it’s clear OIRA ran roughshod over USDA objections.”

EPA spokesman Michael Abboud said the proposed rule “is the proposed text from our announced agreement with the White House and USDA on Oct. 4.” Representatives of the Agriculture Department and the White House press office did not respond to requests for comment, though Perdue on Monday predicted that farmers would be fine once they fully understand what Trump did.

Biofuel industry advocates said they will keep pushing the EPA to alter course, possibly with another personal intervention from the president.

Still, there were no signs Trump had any regrets about the plan on Monday. During a meeting with members of his cabinet, Trump said the deal was approved, ready to sign and “is going to be terrific for the small refiners.”

(Updates with details of Wheeler-Perdue phone call and interagency review, from fifth paragraph.)

--With assistance from Mike Dorning and Mario Parker.

To contact the reporter on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, John Harney

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.