Trump Boosts Sales of Corn Ethanol
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A move that was vigorously opposed by the oil industry, the increase of ethanol sales will definitely help farm states such as Iowa where there are over 50 ethanol-producing corn farms.
The blending of gas and ethanol was first mandated by the Senate 13 years ago in a move that aimed to reduce the U.S. dependency on oil from abroad.
Trump is known for supporting the idea of biofuels, a position he made public time and time again during the 2016 election. This move will appease Midwestern farmers just a month away from the midterm elections.
Up until the beginning of this week, the sale of gas mixtures that contained 15 percent ethanol was banned during the summer because it is more polluting than mixtures with 10 percent ethanol. However, Trump now urges the EPA to change its regulations and allow the year-round sale of E15 gas with the EPA announcing that a rule in this direction won’t be ready before June of next year.
Still, the move is opposed by both environmentalists and oil industry associations, a strange mix to say the least. “Ethanol blended in gasoline does produce more pollutants that lead to smog than gasoline alone,” said David DeGennaro, agricultural policy specialist with the National Wildlife Federation, asked by The Hill. “So by increasing the amount from 10 percent to 15 percent, that breaks those limits that are in the Clean Air Act and could potentially lead to more ozone formation.”
The change could see the price of gas reduce while corn prices could go up.
Currently, around 40 percent of the country’s cornfields are used to make ethanol. The oil industry has other complaints regarding Trump’s latest decision than dwindling prices, as they think this is not a likely scenario. “The administration’s proposal to put limits on fuels trading markets could make matters worse,” said Mike Sommers, president of the American Petroleum Institute (API), in a statement released on Tuesday.
“I can’t overstate how disappointed we are with this decision by the president,” said Chet Thompson, president of American Fuel and Petrochemical Manufacturers, which represents fuel refiners. “We have been working with the administration for a long time trying to find a path forward that can work for everybody,” he stated. “The president certainly has indicated he wanted to find a solution that works for both sides of this issue. But unfortunately, what he has now instructed EPA to do doesn’t come close to that.”
Trump’s call for extended corn sales and E15 gas proliferation actually goes against previous EPA findings which clearly shown that selling E15 gas during the summer would break the Clean Air Act limits, thus breaking the law. “What he’s telling EPA to do is unlawful,” said Thompson. “If the president moves forward, it leaves us zero options but to challenge it.” What this means is that we should expect a shower of court cases against the EPA as it gets nearer to a new set of regulations that would allow the sale of E15 gas.
The Clean Air task force also had their say on the impact on an increased production of corn ethanol.
“Corn ethanol has pretty big impacts on water quality, on soil preservation, on habitat preservation, and on climate, said Jonathan Lewis, senior counsel of the Clean Air task force.
Besides the environment, which is any way in a critical state – as detailed by the U.N. report released on Monday – E15 gas might also take its toll on engines. “Selling a 15% ethanol blend means that retailers have a fuel that is not backdated, in that it is inappropriate for older cars,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. “That leads to problems with labeling, equipment, and could under some circumstances create performance issues for, say, 1990s cars,” he added. Actually, the EPA is currently warning drivers to not fill up with E15 fuel if their car was produced over 17 years ago. This might not be in the best interest of the country’s millions of motorists, many of whom don’t drive the latest cars and trucks, as pointed out by API’s Mike Sommers.
But, there’s always the other side of the issue which is, in this case, the corn farmers themselves, who are happy with Trump’s call. “He answered the call from American farmers by removing the single most important barrier to growth in higher biofuel blends,” said Emily Skor, CEO of Growth Energy. “This announcement is great news for farmers, biofuel workers, retailers and consumers everywhere who want to enjoy cleaner, more affordable options at the fuel pump.”
“This is the right signal to the marketplace at just the right time, as both farmers and renewable fuel producers desperately need new market opportunities and sources of demand,” said Geoff Cooper, president of the Renewable Fuels Association. This position was echoed by the farmers in Iowa, through the voice of Monte Shaw, executive director of the Iowa Renewable Fuels Association, who said: “It’s hard to find the proper adjectives to describe how exciting it is to see year-round E15 move forward. We have worked non-stop on this issue for seven years while the unjustified restrictions hampered retailers from offering E15.”
The EPA themselves also released a statement following Trump’s announcement.
“President Trump has made strengthening the Renewable Fuel Standard an important priority of this administration,” EPA spokesman John Konkus said, referring to the ethanol program by its formal name. “He is fulfilling his promise by providing clear policy direction that will expand opportunities for our nation’s farmers, provide certainty to our refiners and bolster the United States’ role as a biofuels powerhouse. EPA will follow the president’s direction and proceed as expeditiously as practicable.” Since Trump can’t make the shift himself through an executive order, he’s passed the job to the EPA. The President himself rebuked claims that it would harm the environment saying that it’s an out-and-out great deal for the farmers and that “it has no impact [on the environment], 12 months. In fact, there are those who say, ‘You do this and the air is cleaner. You go 12 months instead of eight and the air is actually cleaner.’”
Finally, there’s another matter at stake here: renewable fuel credits. Basically, those involved in producing renewable fuels, such as E15 gas, receive RINs (Renewable Identification Numbers) which can be used as a form of currency in the renewable fuel standard program and those in the market are free to trade them. “Gasoline stations are incentivized to sell gasoline with ethanol,” said Patrick DeHaan, head of petroleum analysis at fuel price tracker GasBuddy. “The more sold, the more RINs they get and “those can be sold to oil refiners that are not blending enough gasoline with ethanol…There is value to selling ethanol.”
The change, though, would see this system go through some reshuffling as the White House looks for more transparency in this process. Not all pieces are yet in their places, so we’ll have to see how it all pans out in the next few months and, ultimately, what will be the aftermath of this decision.
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October 13, 2018 at 07:06PM