When Scott Pruitt, the former Oklahoma Attorney General, resigned his position as Administrator of the Environmental Protection Agency (EPA) in early July of 2018 under the cloud of several ethics scandals, many supporters of the U.S. biofuels industry hoped that his departure would signal the emergence of a more friendly attitude toward their industry, especially in EPA’s management of the Renewable Fuel Standard (RFS) and related policies.
As Administrator, Mr. Pruitt had clearly signaled his preference for the petroleum industry in numerous policy disputes with the biofuel sector, reflecting his close relationship with that industry during his previous service in the Oklahoma state government. Even though President Trump had often spoken during the campaign of his strong support for ethanol, Pruitt continually tried to force ethanol advocates to make concessions to the petroleum industry to get EPA to take actions that they wanted, Specifically, Pruitt sought to eliminate or weaken the market for Renewable Identification Numbers (or RINS), which are the certificates associated with utilization of biofuels in compliance with the RFS, and can be acquired by blending companies to meet their RFS requirements in lieu of actually utilizing ethanol.
Officials of the ethanol industry and their allies and supporters among agricultural groups and members of Congress have sought two policy actions: 1) for EPA to allow year-round use of a higher blend of ethanol, E-15, in the regular gasoline supply, and 2) for relief of some kind from the loss of ethanol demand resulting from the EPA’s whole-hearted embrace of granting waivers to small-scale ethanol production facilities from complying with the RFS, even when they are owned by much larger companies or are highly profitable.
In 2017, a federal court determined that the Obama administration had been too strict in its evaluation of requests for such waivers requested under Section 211(o)(9)(A)(i) of the Clean Air Act. In response to this decision, EPA established new procedures for considering these requests, and recent documents disclosed under the Freedom of Information Act (FOIA) showed that Administrator Pruitt ignored staff recommendations in his decision to make it much easier for companies to obtain such waivers, regardless of the merits of the requests. Since that point in time, EPA has issued 54 waivers to companies that allowed them to avoid RFS compliance for 2016 and 2017, and another 39 requests are pending for 2018. These waivers removed the equivalent of 2.6 billion gallons of demand for ethanol from the marketplace.
After Administrator Pruitt’s resignation, Deputy Administrator Andrew Wheeler was elevated to serve as Acting Administrator, and was formally confirmed in that role by the Senate in February 2019. Prior to this appointment, Mr. Wheeler had worked on the staff of the Senate Environment and Public Works Committee for Senator James Inhofe (R, OK), a strong supporter of the petroleum industry, and had also worked as a lobbyist for the U.S. coal industry.
After President Trump made an explicit public commitment in October 2018 at an event in Iowa to lift restrictions on year-round availability of a higher ethanol-gasoline blend, EPA finalized the regulations allowing such sales on May 31, 2019. For many years, the share of ethanol in regular gasoline had been capped at 10 percent--that mixture called E-10--but the new rules allow a 15 percent share. Prior to this rule, E-15 was available for use during non-summer months, but was limited to purchase by owners of newer model cars.
Since the new rules represent permission for gasoline stations to sell the higher blend but not a requirement to do so, it is not clear how much overall ethanol demand will be boosted by this change. As of 2018, only one percent of all U.S. gasoline stations offered E-15, and adding more capacity by either converting existing pumps or adding blender pumps (which allows the driver to select the desired ethanol/gasoline composition) will take time and money.
Less than two weeks after EPA finalized the E-15 rules, a petroleum industry trade association, the American Fuels and Petrochemicals Association, filed a lawsuit in federal court seeking a halt the expansion of E-15 availability.
Advocates and allies of the biofuels industry have continued to push back on the EPA’s liberal granting of small refinery waivers to the RFS. In mid-June, two Midwest Senators, Tammy Duckworth (D, IL) and Deb Fischer (R, NE) introduced legislation to reform that process. It would set a June 1 deadline for submitting waiver requests, and require EPA to adjust RFS requirements for other companies to make up for the ethanol blending not done by the waived facilities. In addition, under pressure from Midwest members of Congress, President Trump has also ordered EPA and USDA to conduct a review of the waiver process. Representatives of the refiners are seeking to convince EPA to bar USDA from participating in that review, maintaining that it would require USDA to have access to their confidential business information that it might leak to outside parties.
The biofuels industry is also pushing back on EPA’s June 2019 announcement of RFS volumes required for 2019 and 2020, maintaining that the numbers were not consistent with the Congressional intent for the RFS that it serve as a driver for increased ethanol demand.
It is not clear that EPA under Administrator Wheeler is any friendlier to renewable fuel interests than it was under his predecessor, but in recent months industry supporters have been able to capture the attention of President Trump on their concerns, prompting him to weigh in with the agency as he had not done during the Pruitt tenure. The President’s desire to maintain political support in Midwest states for the upcoming 2020 election is likely a factor in his interventions.