October 18, 2017
By Jennifer Jacobs, Jennifer A Dlouhy, and Ari Natter
President Donald Trump intervened personally with the Environmental Protection Agency amid pressure from Republicans in the politically important state of Iowa who worried the agency was poised to weaken biofuel quotas, three people familiar with the discussions said.
Trump directed EPA Administrator Scott Pruitt to back off any changes that would dilute a federal mandate for biofuel use, the people said. A top EPA official said Trump’s urging was unnecessary because Pruitt wasn’t planning on weakening the mandate.
Nevertheless, the agency was told by the White House to drop two changes that were under consideration: a possible reduction in biodiesel requirements and a proposal to allow exported renewable fuel to count toward domestic quotas, said the people, who asked not to be identified because they were not authorized to speak publicly about the move.
The issue is politically treacherous for the president because it pits his allies in the oil industry against Midwest voters who helped elect him, including Iowans who hold first-in-the-nation presidential caucuses. While campaigning in Iowa last year, Trump pledged to protect ethanol and the biofuel mandate.
Trump called Iowa Governor Kim Reynolds Wednesday to reassure her of his commitment to the program. "It was a really good, productive conversation," she said in an interview.
Pruitt has also been working behind the scenes to soothe Midwestern politicians and biofuel backers alarmed by the possible changes the EPA was considering, the top agency official said.
Reynolds is one of a phalanx of Midwest politicians who have lobbied the administration by highlighting the president’s promises to support ethanol and signaling that any move to weaken annual quotas would be seen as a betrayal.
"They are feeling the pressure, and that’s why we need to keep it up, we can’t let down," Reynolds said during a press conference with biofuel backers in Pella, Iowa.
The 12-year-old Renewable Fuel Standard compels refiners and importers to use biodiesel and alternative fuels such as corn-based ethanol. It is especially valued in the Midwest, where corn and soybean farmers see the program as vital to ensure predictable demand. But the RFS also is opposed by many oil refiners that argue it’s a costly and burdensome mandate that forces them to blend ethanol into gasoline -- or buy credits to make up the difference.
It was not immediately clear whether the administration’s assurances -- which weren’t announced publicly -- will be enough to satisfy lawmakers who have threatened to stall EPA nominees over the issue. The EPA official said the latest information they have is that the senators are not holding up any particular nominee.
But Iowa Republican Senator Joni Ernst refused to commit to backing one EPA nominee in a news release Wednesday, only saying she was close to getting the assurances she needed.
The EPA has a Nov. 30 deadline to finalize next year’s quotas, and it may not announce any changes before then.
"The proof is in the pudding," said Monte Shaw, head of the Iowa Renewable Fuels Association. "We need to see the details."
The EPA ignited a backlash last month when it asked for public comment on potential biofuel quota reductions and floated the idea of a 15 percent reduction in requirements for biodiesel. Pruitt has said that notice was only seeking comment, not committing to any reduction in biofuel quotas.
Separately, EPA staff had been considering a proposal from some refiners to allow some exported biofuel to count toward the domestic mandate -- a move that would make it easier and cheaper to meet annual domestic quotas. Pruitt is also concerned about imported biodiesel being used to fulfill the quotas and jeopardizing U.S. energy independence.
The market for credits refiners use to show compliance with the mandates indicates that traders think ethanol backers will prevail.
Renewable Identification Numbers tracking ethanol consumption for 2017 fell in late September after the reports of possible EPA changes. Since hitting a low of 66 cents per credit on Sept. 28, those RINs bounced back to 83 cents apiece after news emerged that Trump had intervened.
Pruitt has assured people he is following through on Trump’s pro-ethanol promises. In July, the agency proposed requiring U.S. refiners use 15 billion gallons of conventional renewable fuels in 2018 -- the maximum allowed under the Renewable Fuel Standard. Oil refiners had pushed for a lower target.
And agency officials have been studying whether they have authority to allow gasoline containing 15 percent ethanol to be sold year-round, something the biofuel industry is seeking.
But news of possible changes to other parts of the program provoked a strong response from Midwestern Republicans, led by Iowa Senator Chuck Grassley who immediately began pressuring the Trump administration to back off those ideas.
Grassley took to Twitter to blast a "bait and switch" by the administration, saying any moves to weaken the Renewable Fuel Standard program conflicted with Trump’s vow to support ethanol and Pruitt’s assurances to uphold congressional intent behind the mandates during his confirmation hearing.
"You can get in the weeds about what you want to do or not do in the way of policy, but this is an issue of the president keeping his promise," Grassley said Tuesday.
Trump urged Pruitt to work with Grassley to resolve the issues.
Farm-state senators met with Pruitt over the issue on Tuesday, after Ernst told reporters she couldn’t commit to backing a nominee to head the EPA air office that administers the renewable fuel program. A planned Senate committee vote on that nomination, scheduled for Wednesday, was scrapped afterward. Ernst is a member of that committee, on which Republicans hold a narrow 11-10 margin.
"A handful of senators completely cornmailed the administration by threatening to hold nominees hostage until they get their way," Stephen Brown, the head of federal affairs for refiner Andeaver, said in an email. "Faced with tactics that would have made Don Corleone blush, the administration essentially had no choice but to relent."
On Wednesday, Ernst said she was close to getting the reassurances she needs.
“My staff and I will continue to keep a watchful eye as these assurances come to life, and while we are still in negotiations, I do feel good about the direction we are headed," Ernst said in an emailed statement.
Outside analysts predicted that Iowa’s political clout will help it prevail in the end.
"The track record here has been pretty strong with these Midwest senators," said Paul Niznik, a consultant to refiners and others who track the RIN market for Argus Consulting Services. "We know it’s not going to happen. It looks like political theater."
Read the orignal article: Trump Tells EPA to Boost Biofuels After Iowa Uproar