In April, President Trump pledged to fix a regulation pertaining to Reid Vapor Pressure (RVP) for ethanol blends above E10: “We’re going to raise it up to 15 percent and raise it to a 12-month period,” Trump pronounced to reporters, adding that “makes a lot of farmers very happy.”
The relatively simple regulatory change would allow E15, which is approved for use in approximately 90 percent of vehicles on the road to day in America, to be sold year-round. EPA Administrator Pruitt has said he believes EPA has the authority to make the change, but he hasn’t yet. He did, however, issue the largest round of refinery waivers in U.S. history, destroying 1.6 billion gallons of ethanol demand.
The Administration may be concerned about the optics because Administrator Pruitt is spending time this week with ethanol folks, making stops in Kansas, Nebraska, South Dakota and North Dakota. He seems to be staying out of Iowa, the home of Senators Chuck Grassley and Joni Ernst, who have displayed the most public criticism of EPA’s recent action against ethanol and inaction for ethanol. Here is some reporting on his first round of meetings.
EPA Administrator Gets an Earful from Kansas Corn Farmers on Ethanol
Kansas corn and ethanol leaders told Administrator Scott Pruitt that his efforts to undermine the Renewable Fuel Standard (RFS) are helping Big Oil while hurting rural America. Administrator Pruitt toured the East Kansas Agri Energy LLC ethanol plant in Garnett, KS and sat down with a roomful of farmers and ethanol supporters Tuesday morning offering explanations and promises.
Growers told Administrator Pruitt they were “mad as Hell” about EPA efforts they believe undermines the RFS law. The EPA administrator told the standing-room-only crowd that as regulators, EPA is not supposed to pick winners and losers.
Kansas Corn Growers Association President Ken McCauley said farm and ethanol groups at the meeting wanted to set to tone and help Administrator Pruitt understand the frustration being felt in rural America.
“When you look at what EPA is doing, they are most definitely picking winners and losers and right now, ethanol is the loser,” McCauley said. “Our concern was that Administrator Pruitt thought he could come to Kansas, take a few photos with smiling farmers and tell the President that corn farmers are okay with his actions. That would be a gross misinterpretation of what happened here today. I told him that EPA’s attacks on ethanol don’t just hurt plants like EKAE, they hurt farmers, rural communities and American consumers who benefit from ethanol with lower prices and cleaner air.”
In a meeting that was serious and at times, tense, corn growers and ethanol supporters explained the problems EPA has caused by destroying demand for ethanol. Pruitt said he had to grant the small refinery exemptions because of a recent court ruling that allows refiners to only show financial hardship. However, he did not articulate how financial hardship was defined.
“We asked him what constituted financial hardship and I can’t say we got an answer” McCauley said. “He told us the standards had changed and that RINs were more volatile. But there is no transparency in these decisions.”
Kansas Corn leader Dennis McNinch, Utica told Administrator Pruitt farm families and ethanol plants were hurting from EPA’s actions.
“To be honest, Administrator Pruitt, we’re mad as hell. Today, the American farmer is struggling to make ends meet and our industry is on the cusp of financial ruin in many areas of the country. We are under attack once again from the oil industry as they try to unravel the RFS using their latest scare tactic claiming that RINS are about to put them out of business. Big oil is enjoying wide profit margins today. People like Senator Cruz believe that the oil industry needs to be thrown a bone. How many bones do they need?”
Administrator Pruitt thanked the speakers “despite rather harsh criticism. It’s important for me to hear how passionate and concerned you are about the issues,” he said.
He provided some insight into areas that could benefit ethanol. He said he supported an RVP waiver that would allow year-round E15 sales and believes EPA has the authority to grant it, eventually. He also said he thought the gallons in the refinery waivers should be reallocated to the RFS obligations to account for lost demand.
“We will hold the Administrator to his promises,” McNinch said. “Unfortunately, he consistently tied these positive actions with his so-called ethanol deal that includes assigning RINs on ethanol exports. We don’t think that’s legal, and we are sure it would draw trade challenges through the WTO.”
Administrator Pruitt spoke strongly in favor of reallocating waived RINs to refiners back to the RFS obligations. Currently, those waived gallons represent lost demand.
“Whether we have an agreement or an understanding going forward on these issues, I think it’s really important to us to enforce that if we grant an exemption, those RINs are recaptured and reallocated to the RVO. That’s a huge change that’s never been done. That’s a regulatory process. That’s just out of fairness,” Pruitt said.
McCauley said corn growers would wait to see if the discussion leads to improvements in EPA’s administration of the RFS. “It is great to have a high profile person like Administrator Pruitt to come to Kansas,” he said. “Now we need to see if he can put those words into action.”
Kansas Corn CEO Greg Krissek summarized events leading up to the meeting and farmers’ frustrations.
“Early this year, Big Oil wanted relief from high RIN prices. We showed how granting year-round E15 sales through an RVP waiver would alleviate higher RIN prices. President Trump agreed, but said there would have to be a trade-off for the oil companies,” Krissek said. “We didn’t get the RVP waiver; oil refiners got exempted from 1.6 billion gallons of ethanol use; RINS are at a five-year low and now EPA wants to kill our exports by applying RINs to ethanol exports which has legal and trade issues. We don’t see where ethanol is getting anything but played by EPA.”
Under Administrator Pruitt’s guidance, EPA has granted an unprecedented 1.6 billion gallons in waivers, with an estimated economic impact of $5.3 billion in lost markets for ethanol, corn and RINs. A RIN is assigned to every gallon of ethanol blended to prove compliance with the RFS law which provides market access for ethanol.
The Kansas Corn Growers Association advocates for corn and corn products and represents its members in legislative and regulatory issues.