Biofuel factory aerial view i-Stockr/Thinkstock

Does ethanol have a friend in Trump?

Trump’s nominees to lead the three agencies that have the most interaction with the industry have either criticized the nation’s biofuel mandate or hail from states with influential constituencies opposed to the policy.

by Mario Parker and Jennifer A. Dlouhy

Despite President Donald Trump’s campaign vows to support American ethanol producers, the $24 billion corn-based ethanol industry finds itself short on allies in the new administration.

Trump’s nominees to lead the three agencies that have the most interaction with the industry have either criticized the nation’s biofuel mandate, known as the renewable fuel standard, or hail from states with influential constituencies opposed to the policy.

"There is concern in the Midwest that no cabinet pick has a demonstrably pro-RFS track record and that there is no Midwestern representation in the cabinet," said the Iowa Renewable Fuels Association in a statement last week.

That’s a big shift from the Obama administration when for eight years former Iowa Governor Tom Vilsack served as agriculture secretary, zealously defending the law, signed by former President George W. Bush, that requires refiners to add biofuel to the nation’s diesel and gasoline supply.

Cabinet Nominees
By contrast, some of Trump’s cabinet nominees have been openly hostile to the 12-year-old law. For instance, Oklahoma Attorney General Scott Pruitt, the president’s pick to lead the Environmental Protection Agency, which administers the requirements, has called them "unworkable." In 2013, he filed a legal brief with counterparts from Alabama and Virginia backing an oil industry lawsuit challenging the EPA’s approval of a gasoline blend containing 15% ethanol. And in a news release that same year, he implored federal regulators "to correct this flawed program."

Pruitt struck a different tone in his Jan. 18 confirmation hearing, when Corn Belt lawmakers pressed the nominee to back the renewable fuel standard. While they exacted a pledge from Pruitt to honor Congress’s intent in creating the biofuel mandates, he did not rule out an administrative change in the structure of the program that has been urged by Valero Energy Corp., the largest independent U.S. refiner, and billionaire Carl Icahn, a regulatory adviser to Trump.

Illinois Senator
Democratic Senator Tammy Duckworth, of Illinois, was skeptical of Pruitt’s bid "to reassure pro-RFS states by repeating a nice-sounding but ultimately vague and hollow mantra" about enforcing the renewable fuel standard, since the law gives the EPA "considerable discretion."

The EPA has wide power to set annual biofuel quotas -- even waiving the minimums set by the law.

"As EPA administrator, you could still technically be compliant with Congress -- with the law -- but actually be working against it," Duckworth told Pruitt.

Former Texas Governor Rick Perry, tapped to lead the Energy Department, asked the EPA to waive half the quota that would be fulfilled by traditional, corn-based ethanol in 2008, arguing the mandate was spiking grain prices and hurting livestock producers. Perry made a similar waiver request four years later, when a severe drought devastated crops in the Midwest.

Poultry Producers
Trump’s pick to replace Vilsack at the Agriculture Department, former Georgia Governor Sonny Perdue, hasn’t publicly opposed the renewable fuel standard. But his state is the nation’s leading poultry producer -- the only industry that matches Big Oil in its opposition to the biofuel requirements due to a belief that it drives up the cost of feed.

Ethanol could use a friend in Washington right now.

Icahn, who owns a majority stake in independent refiner CVR Energy Inc., is lobbying the government to change the way the program is structured, by shifting the compliance burden away from refiners toward fuel blenders. Leading biofuel trade groups oppose the move, arguing it would undermine the law.

Oil Industry
The American Petroleum Institute is pushing Congress to repeal or overhaul the renewable fuel standard, though it remains a tough lift politically. 

“The administration is trying to appoint these oil people and they’re going to pick our pocket now on renewable fuels, which is really the key to our ag industry,” Lyle Hodde, a corn farmer from Sidney, Iowa, said on a Jan. 17 conference call with reporters, organized by the Progressive Change Campaign Committee.

The Trump transition team and new administration did not respond to requests for comment.

Thomas Cape, a senior analyst and head of energy policy research at Evercore ISI in New York, said he expects Pruitt to be confirmed and shift the point of obligation within his first 100 days leading the agency. 

Trump expressed support for the renewable fuel standard on the campaign trail, including while stumping in Iowa, the heart of the U.S. Corn Belt. Just two days before he was elected, during a Nov. 6, 2016, campaign event in Sioux City, Iowa, Trump pledged "we’re going to protect corn-based ethanol."

Cable Ads
The ethanol industry is making sure Trump doesn’t forget. In the week leading up to Trump’s inauguration, trade groups aired cable television ads featuring his promise to protect the renewable fuel standard and touting jobs it supports.

“It’s not the Pruitt administration or the Perry administration,” Bob Dinneen, president of the association, a Washington-based trade association, said by phone. “It is the Donald Trump administration, and until proven otherwise, I’m going to accept that his strong support for the RFS specifically and ethanol, generally, is going to be there.”

Growth Energy, a Washington-based ethanol lobby group, is “confident” Trump’s cabinet picks are “fully aware of his vocal support” for the mandate, Emily Skor, the group’s chief executive officer, said in a statement.

Still, Trump’s cabinet appointees have spooked some biofuel producers who wonder if the president will maintain that same commitment now that he’s in the White House. Iowa’s renewable fuel group wants Trump to tap biofuel backers in the next round of agency leadership appointments, particularly within EPA, to ease “worries being expressed privately in many ag circles.”

“There’s not people looking to jump off the grain bin, but it’s like ‘Jeez, when are we going to get somebody?’" Monte Shaw, executive director of the Iowa Renewable Fuels Association, said by phone.

To contact the reporters on this story: Mario Parker in Chicago at mailto:mparker22@bloomberg.net; Jennifer A. Dlouhy in Washington at mailto:jdlouhy1@bloomberg.net

To contact the editors responsible for this story: Simon Casey at mailto:scasey4@bloomberg.net; Jon Morgan at mailto:jmorgan97@bloomberg.net

© 2017 Bloomberg L.P

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