Big Corn, Big Oil Unhappy with Fed's Biofuel Plan

Corn farmers, ethanol producers, refinery representatives, energy traders and state and local officials from the Midwest all blasted away at the Trump administration's proposed biofuels plan for next year during a public hearing on Wednesday hosted by the U.S. Environmental Protection Agency (EPA).

The hearing in Ann Arbor, Michigan, marks the second public meeting on the topic in as many days, airing the grievances of the opposing oil and corn constituencies President Donald Trump has been working to win over ahead of next year's election.

At issue is a proposal unveiled this month by Trump’s EPA that would increase the amount of corn-based ethanol some oil refineries must blend next year to make up for volumes the agency expects to waive under its Small Refinery Exemption program.

The proposal was meant to please farmers, while securing a program the oil industry says is crucial to the survival of small oil refining facilities. It has instead drawn criticism from both sides.

The corn industry says it does not go far enough to help ailing biofuel producers, already suffering from the impacts of the U.S. trade war with China. “It is not hard to understand why there is a growing sense of frustration in the heartland," said Iowa Agriculture Secretary Mike Naig.

And the oil industry complains the proposal is unfair to refineries that must do more blending. Patrick Kelly, a spokesman for the American Petroleum Institute, said during the hearing that lasted more than four hours that the proposal "punishes the companies already complying" with the nation's biofuel law.

The EPA is seeking to finalize the proposal ahead of an end-November deadline to set 2020 blending requirements.

The U.S. Renewable Fuel Standard (RFS) requires the refining industry to add some 15 billion gallons of ethanol every year to its gasoline, along with additional volumes of other types of biofuels. But small individual facilities of 75,000 barrels per day or less can secure exemptions from the RFS in a confidential process, provided they prove compliance would cause them disproportionate economic harm.

The EPA has roughly quadrupled the number of waivers granted to small refiners since Trump took office in January 2017, angering the corn industry which says the exemptions hurt farmers by cutting ethanol blending volumes.

"The rules have changed and now rural America is losing," said Brian Duncan, farmer and vice president of the Illinois Farm Bureau. "We were the victims of a classic bait and switch."

The oil industry says the waivers are crucial to the survival of small refineries and deny that the exemptions have a meaningful impact on ethanol demand.

On Tuesday, the House of Representatives Energy and Commerce Committee held a hearing to discuss the waiver program, at which biofuel industry representatives argued the EPA should limit their use and provide more information about applicants and recipients.

Reporting by Richard Valdmanis