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EPA rule proposal reneges on Trump deal, IRFA says

A proposed rule draft released by the Environmental Protection Agency last week falls short of promises made by the EPA during a deal that was announced earlier this month regarding the Renewable Fuel Standard, according to the Iowa Renewable Fuels Association.

The agreement, negotiated by President Donald Trump between the EPA and the United States Department of Agriculture, with input from midwestern elected officials, was announced on Oct. 4. The agreement addressed issues caused by RFS refinery exemptions that have impacted biofuels demand over the past several years.

Under the RFS, refineries across the country must blend a certain volume of renewable fuel to replace or reduce the quantity of petroleum-based fuels. The law allows small refineries to apply for an exemption on the basis of “disproportionate economic hardship” from the EPA and receive a waiver from blending ethanol in those refineries.

When a waiver is granted to a refinery, the volume of biofuels like ethanol that the refinery would have blended should then be reallocated to other refineries to maintain the national total volume obligation. However, for the past three compliance years, those waived volumes have not been reallocated, totaling four billion gallons of biofuel demand to be destroyed, according to information from the EPA.

The agreement announced on Oct. 4 stated that the EPA and the USDA would commit to ensuring 15 billion gallons of ethanol will be blended with fuels in refineries across the country beginning in 2020, with the EPA ensuring going forward that it would reallocate any exempted gallons to other refineries. As per that agreement, the EPA said it would use a three-year rolling average of small refinery exemptions it had granted to use as its look-forward estimate to anticipate the volumes it would need to reallocate in upcoming compliance years.

However, now the IRFA says the EPA has reneged on the deal with its proposed rule draft that was released on Oct. 15.

When the EPA released its draft, it didn’t include using the three-year rolling average of exemptions it had granted.

“We are proposing to project the volume of gasoline and diesel that will be exempt in 2020 due to small refinery exemptions based on a three-year average of the relief recommended by the Department of Energy,” the EPA rule draft reads instead.

“When a refinery exemption comes in, they go to the DOE for an economic review and the DOE recommends to the EPA whether they should be granted or not — in full, partial, 50 percent or not at all,” said Monte Shaw, executive director for the IRFA. “The problem is, for the last three years under Trump, the EPA has simply ignored the DOE recommendations, and in the rule itself, it points out that the actual SREs granted by the EPA in each of those three years of the Trump Administration have been roughly double what the DOE recommended.”

If the EPA uses the data from the recommendations, Shaw said, it won’t be fixing the problem at all.

Shaw also pointed out that the EPA does not have an obligation to follow DOE recommendations, which leaves doubt that it would do so in the future.

“When you take into consideration that this does not bind them in any way, shape or form to follow DOE, that they have complete discretion, and then you look at their track record on following DOE recommendations, which is exactly zero percent, and then you factor in all the other things that they’ve said and told us and then done the exact opposite when it pertains to the RFS over the last three years, there is just simply no trust there,” he said.

On Monday night, interagency emails and comments on the rule draft from the White House’s Office of Information and Regulatory Affairs were uploaded to a government regulatory docket on regulations.gov. In the emails, the OIRA objected to the language in the proposal.

“We do not agree with the inclusion of the alternative as drafted,” the OIRA wrote on Oct. 9. “We believe there is no rationale for using older data and the alternative is inconsistent with the WH decision last week to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020.”

The OIRA went on to recommend an alternative “that is based on the actual SRE issued during the period” and is also “grounded with actual historic data and gives greater consideration and weight to past practices.”

In an email dated Oct. 11, the EPA rejected that comment, replying that the proposal reflected the agreement Trump brokered between the EPA and the USDA and that no changes would be made before the draft was released.

“Well, it doesn’t reflect the deal and they knew it and they’re being intentionally misleading,” Shaw said.

Grassley, Ernst on the RFS

Many elected officials voiced support for the deal when it was announced earlier this month.

Iowa Sen. Chuck Grassley had said that the deal would maintain the integrity of the RFS. While he sees the issues with this rule draft, he’s expressed faith that the original deal will hold strong.

“All along, I’ve said what farmers and biofuels producers want is what was promised by Congress,” Grassley said. “And that’s adhering to the biofuels blending targets in law. Ultimately, this will come down to trust and implementation at EPA. The ethanol and biodiesel industries have a lot of cause to distrust EPA and that is understandable. But President Trump brokered this deal and any attempt to undermine it from EPA would represent a betrayal of the president. I expect EPA would not do that after all the work that’s gone into this issue.”

Iowa Sen. Joni Ernst also voiced support for the deal, which she said created a clear message to the EPA to uphold the RFS.

On Thursday, the senator said, “Just a couple weeks ago, President Trump followed through on his commitment to our farmers and biofuels producers and guaranteed we’d see 15 billion gallons. Now we’re seeing EPA try to wiggle themselves out of the original agreement. As we work through this proposed rulemaking, I’m encouraging Iowans to submit their comments to EPA. And, as I have time and again, I will absolutely hold EPA accountable. We made a deal: we were guaranteed the 15 billion gallons, and EPA needs to follow through on that – it’s the law after all.”

After the EPA rule draft was released on Oct. 15, Iowa Secretary of Agriculture Mike Niag tweeted, “Today’s proposed rule from the EPA falls short of delivering the transparency and predictability our farmers and biofuels producers need. I’ll continue working with Gov. Reynolds, Senator Ernst and Senator Grassley to see that the 15 billion gallons of biofuels mandated by the RVO are met. That is the deal President Trump made and Iowans expect the EPA to comply.”

When it comes to this RFS program, what Iowa farmers need is certainty, Shaw said.

“What we need is certainty, what the market needs is certainty,” he said. “If the RFS is going to be real, these numbers are going to be met, we’re going to start using more biofuels again. That’s what the market needs so that we can start seeing prices get better, plants reopen and start producing again.”

When the EPA released its proposal on Oct. 15, corn and ethanol prices went down, which is the market showing its thoughts of the proposal, Shaw said.

From Oct. 14, the day before the draft was released, to the close of markets on Wednesday, the price of corn has decreased from $3.98 to $3.88 a bushel, and the price of ethanol has decreased from $1.50 to $1.43 a gallon.

What Shaw is reminding Iowans now is that this EPA rule draft is still in its proposal stage.

“It’s our job to convince the president to whack the EPA in line and say, ‘Hey, a deal is a deal,'” he said.

Shaw encourages Iowans to reach out to their elected officials at all levels to voice their concerns about this issue and to put pressure on the EPA to honor the deal it announced on Oct. 4.

“We have to do two things,” he said. “We have to make a reasonable, logical, factual, legal basis for why our way is better and get that into the record because that is part of the rule-making process. If the EPA is going to change from the proposal to the final rule to what we want, we have to supply that rationale and facts and we will do that.”

The EPA will hold a public hearing on this proposed rule at 9 a.m. on Oct. 30. The hearing will be held at the Ann Arbor Marriott in Ypsilanti, Michigan.

“There are a lot of angry people out there and I think it’s time to let them be heard, to say ‘Hey, we’re tired of the EPA undercutting everything about biofuels that the administration is trying to do,'” Shaw said.

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