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Trump promises to appease ethanol makers as anger builds over refinery waivers

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Ethanol RINs recover half of price drop since waivers

Washington — Biofuel makers are pushing the US Environmental Protection Agency to rewrite the 2020-21 biofuel blending mandate as farm-country anger builds about small refinery waivers eating into ethanol demand.

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The anger has gotten the attention of President Donald Trump, who tweeted Thursday that his administration was working on a "giant package" that would benefit the biofuel industry.

"The Farmers are going to be so happy when they see what we are doing for Ethanol, not even including the E-15, year around, which is already done," Trump said, referring to his lifting the ban on summertime sales of gasoline blended with 15% ethanol.

"It will be a giant package, get ready! At the same time I was able to save the small refineries from certain closing. Great for all!" Trump added in the tweet.

The latest battle between biofuel makers and refiners has flared up since EPA August 9 issued 31 waivers to smaller refineries, exempting the plants from the Renewable Fuel Standard.

Biofuel makers argue the waivers have gutted demand and led to a wave of ethanol plant closures, while oil refiners argue they have not hurt ethanol production, sales, or demand.

Ethanol RINs have recovered about half of the price drop seen after the latest refinery waivers.

S&P Global Platts on Thursday assessed D6 ethanol RINs for 2019 compliance at 15.25 cents/RIN and 2018 credits at 7.75 cents/RIN, both down 0.5 cent from Wednesday.

D6 RINs were at 19.75 cents/RIN for 2019 and 15.5 cents/RIN for 2018 August 9.

RINs are tradable credits EPA issues to track production and use of alternative transportation fuels. For corn-based ethanol, one gallon of ethanol yields one RIN.

ETHANOL PLANT CLOSURES

EPA has until the end of November to issue its final 2020-21 RFS volumes, but biofuel industry sources said the Trump administration would need to take action in the coming weeks to prevent more ethanol plant closures.

US refiners said Thursday they were prepared to fight any rulemaking changes in court.

"The RFS is a burden on all refineries regardless of size," Chet Thompson, president of the American Fuel & Petrochemical Makers, told reporters during a briefing. "However, hardship waivers provide lifelines to small refineries that are being absolutely smothered by the RFS and its high compliance costs."

The Renewable Fuels Association responded to Trump's tweet with a chart of 17 ethanol plants that have closed or idled in the past year.

"We look forward to your news," RFA said. "We know you've not forgotten your promise to support ethanol producers."

RFA said the US ethanol blend rate -- the average content of ethanol in the gasoline pool -- fell to 10.07% in 2018 from 10.13% in 2017, after the industry ramped up production in anticipation of demand that did not materialize as a result of the small refinery waivers. The ethanol trade group also pointed to the Energy Information Administration lowering its projection for 2019 domestic ethanol use by 450 million gallons to 14.37 billion gallons since January 2018.

In July, EPA proposed a 2020 biofuel mandate of 20.04 billion gallons, up less than 1% from this year. Renewable fuel would make up 10.92% of US transportation fuel supply next year before any refinery waivers, if volumes are approved as proposed.

The conventional ethanol mandate would remain at 15 billion gallons. The biofuel industry had hoped for a 2020 conventional ethanol mandate of 15.5 billion gallons, after an appeals court ruled in 2017 that EPA had improperly waived 500 million gallons in the 2016 mandate.

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com

2nd Annual North American Crude Oil Exports Summit | October 28-30, 2019 | Houston, Texas

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