U.S. EPA chief hints he could order more ethanol in fuel

Valero Energy's ethanol plant at Aurora, S.D., about 90 km north of Sioux Falls. (Valero.com)

New York | Reuters — A week after the White House suspended its bid to reform the nation’s biofuels policy to aid oil refiners, the head of the U.S. Environmental Protection Agency on Tuesday dangled a tantalizing prospect to Midwest corn farmers, saying the agency has the power to expand sales of higher-ethanol gasoline blends.

EPA administrator Scott Pruitt made the comments during a multi-day tour of the Midwest, as he fended off criticism from farmers and heartland lawmakers that his attempts since last year to overhaul the U.S. Renewable Fuel Standard (RFS) marked a betrayal of Republican President Donald Trump’s promises to support rural jobs.

Those efforts, aimed at helping the oil industry cope with the costs of the RFS, came to a halt last week when the White House delayed indefinitely the announcement of a deal that had been months in the making. The deal would have effectively reduce the amount of corn-based ethanol U.S. refiners were required to blend, while also allowing summertime sales of gasoline containing 15 per cent ethanol, a practice EPA currently bans due to smog concerns.

“He said they have the authority” to allow higher-ethanol gasoline sales year-round, said Bill Pracht, president and CEO of East Kansas Agri-Energy, after Pruitt visited his ethanol plant in the town of Garnett. “He didn’t commit to it as a standalone.”

The corn industry has long sought approval to sell gasoline containing 15 per cent ethanol, a blend called E15, in the summer because it would increase demand for corn-based ethanol. EPA currently bans E15 during summer due to concerns the product contributes to smog, a finding contested by the biofuels industry, which has some research to back its position.

EPA spokesman Lincoln Ferguson confirmed Pruitt’s comments: “The administrator shared that he believes statutory authority to grant the… waiver for E15 exists under the Clean Air Act, and to be effective, would require a subsequent notice and comment rule making process.”

The RFS requires oil refiners to mix increasing volumes of biofuels like ethanol into the nation’s fuel each year, and prove compliance by earning or acquiring blending credits that must be handed in to the EPA.

The law has helped Midwest corn farmers by creating a 15-billion-gallon-a-year market for ethanol, but refining companies have complained it incurs steep costs for them.

The White House deal last week would have allowed U.S. biofuels exports to count, for the first time, toward the annual volumes quotas, reducing the blending burden on refiners and lowering their costs. Farm state lawmakers refused to support that idea, even though it also would have provided the E15 waiver as a concession to the corn lobby.

During his visit, Pruitt added that he still supported allowing exports of ethanol and other renewables to qualify under the RFS, though he said the decision from the White House on that was put on hold, according to Pracht.

“It was important he finally got a glimpse of our industry firsthand,” said Pracht. “This is such an economic driver for our community,” said of his operation, which employs 50 people.

Reporting for Reuters by Chris Prentice and Richard Valdmanis.

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