The Environmental Protection Agency and the Department of Agriculture jointly proposed new rules on Friday that would increase ethanol consumption at the expense of oil refineries to help corn and soybean farmers buffeted by President Donald Trump's trade wars.
The plan would overhaul the system of quotas for ethanol, a fuel that is made from corn and other crops, as they blend their fuels. Its overall goal is to increase the sale of the biofuel beyond the current mandate of 15 billion gallons annually.
It also will ensure that a gasoline blend made of 15% ethanol will be available at the pumps already in place at most gas stations, rather than requiring the installation of new pumps. The proposal includes trade measures to increase the access of ethanol to foreign markets.
The move is widely viewed as an effort to relieve pressure on farmers at a time when the Trump administration is escalating its trade war with China and Europe.
Brian Thalmann, a corn and soybean grower in Plato, Minn., who is on the board of ethanol producer Heartland Corn Products, said the relief is needed. Tariff issues and the waivers contributing to slacking ethanol demands, on top of bad weather, have made it a tougher year for corn farmers and created uncertainty in the markets.
"We need to get back to moving forward with some certainty," said Thalmann, who just finished his term as president of the Minnesota Corn Growers Association.
As of Thursday, 18 of the 200 or so ethanol plants in the U.S. had been closed, either permanently or idled, said Geoff Cooper, CEO of the Renewable Fuels Association, in a Thursday conference call with reporters.
The closures include Corn Plus in Winnebago, Minn.
Cooper said the Trump administration plan couldn't come "soon enough" for the industry.
Ethanol plant closures, Cooper said, also are hurting local livestock producers because distillers grains, or DDGS, are a byproduct of making ethanol and are sold as an animal feed.
Kevin Book, managing director at research firm Clearview Energy Partners, said he did not expect Trump to ease up on import tariffs that have prompted retaliation against American agricultural exports. But, he said, farmers are critical to the president's re-election effort, and their anger is forcing Trump to favor grain farmers over the oil and gas industry, which has resisted fuel blends that are higher in ethanol as expensive and inefficient.
"Trade has made the president more farmer-friendly," Book said. "The trade pressures on his Midwest base have forced concessions that otherwise might not have happened, given the president's pro-fossil ideology."
Midwestern lawmakers greeted the proposal warmly. Sen. Chuck Grassley, an Iowa Republican and a critic of the trade war, said in a statement that Trump had "listened to the concerns of farmers and biofuel providers and delivered on their behalf."
Sen. Tina Smith, a Democrat from Minnesota, said the Trump administration's measure was needed.
"While I wish it had taken less time for the White House to get on board with championing this vital program and cracking down on unnecessary waivers, finally protecting the RFS signals the Trump administration heard concerns from American farmers loud and clear."
But oil-state lawmakers and industry leaders were critical. Sen. John Barrasso of Wyoming, chairman of the Committee on Environment and Public Works, which oversees the EPA, said he believed the rules would lead to shuttered refineries and lost jobs. He noted that refineries employ thousands of people in Wyoming alone.
"Any plan to transfer small refineries' biofuel obligations to other refineries will do more harm than good," Barrasso said. The Trump administration's new plan to boost U.S. biofuels demand as it seeks the support of farmers in next year's election is likely to trigger a backlash from the oil industry.
Trump promised farmers a "giant package" related to ethanol in August after his administration angered the powerful corn lobby by exempting 31 oil refineries from their obligations under the nation's biofuel policy, freeing them from a requirement to blend corn-based ethanol into their fuel or buy credits from those who do.
The plan, devised after weeks of meetings between White House officials and industry representatives, would make up for those waivers by increasing the amount of ethanol refiners must use in the future, and by further expanding the retail market for higher ethanol blends of gasoline like E15.
Staff writer Mike Hughlett contributed to this report.