Washington Insider --Friday

E15 Ethanol Rule Fight

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

WTO Concurs Mostly With US Challenge of China Supports To Farmers

China's support for its agricultural producers has been an issue spanning two U.S. administrations and a dispute settlement panel at the WTO has mostly sided with U.S. contentions that China is exceeding commitments it made when it joined the world trade body.

For 2012 through 2015, China "provided domestic support... in the form of market price support to producers of wheat, Indica rice and Japonica rice in excess of its commitment level," a dispute settlement panel report distributed today (February 28) stated, noting that China "acted inconsistently with its obligations."

However, relative to the U.S. case that China exceeded its support commitments on corn, the WTO said, "The panel declined to rule on China's subsidies for producers of corn on the grounds that the measure at issue had already expired before the initiation of the dispute."

Australia, Brazil, Canada, Colombia, Ecuador, Egypt, El Salvador, the European Union, Guatemala, India, Indonesia, Israel, Japan, Kazakhstan, the Republic of Korea, Norway, Pakistan, Paraguay, the Philippines, the Russian Federation, the Kingdom of Saudi Arabia, Singapore, Chinese Taipei, Thailand, Turkey, Ukraine, and Viet Nam notified their interest in participating in the Panel proceedings as third parties.

Key in the dispute was the calculation of the value of China's market price support (MPS) provided to producers of wheat, rice and corn, a summary of the panel's findings said.

While this dispute result covers supports for domestic agriculture, there is still an ongoing dispute result awaited on the operation of import tariff-rate quotas (TRQ) by China for corn, wheat and rice.

U.S. Trade Representative Robert Lighthizer told lawmakers in a hearing Wednesday that the U.S. is also trying to address these WTO complaints in the context of the U.S.-China trade negotiations. The positive ruling on wheat and rice supports could give the U.S. some ammo, but it is likely that the TRQ issue could be more relevant to the Sino-U.S. trade prospects.

Senate Clears Wheeler to Take EPA Helm

EPA will have a full-time administrator at the agency for the first time since July via a Thursday vote in the U.S. Senate to approve Andy Wheeler to the post.

The chamber approved the nomination 52-47, with Sen. Susan Collins, R-Maine, voting against his nomination. Wheeler was approved by the Senate via a similar vote in April 2018 as Deputy Administrator and he was elevated to acting Administrator in July when embattled Administrator Scott Pruitt resigned.

"Congrats to EPA Admin Wheeler who was just confirmed by the Senate," Sen. Chuck Grassley, R-Iowa, said via Twitter. "Now we need to accomplish Pres Trump’s mission to end unnecessary fed govt red tape incl. lifting the ban on summertime sales of ethanol/E15."

Biofuels issues will be among the key ones that agriculture interests will be monitoring in coming weeks, especially with the agency pledging to make sales of E15 fuel year-round. The agency is also going to propose modifications to the Renewable Identification Number (RIN) program, biofuel credits that obligated parties can buy to prove compliance with the Renewable Fuel Standard (RFS).

Ag interests will also be closely watching EPA's proposed levels for the RFS relative to 2020 biofuels and 2021 biodiesel. EPA is also expected to propose at the same time a "reset" of the RFS through 2022. Reports have indicated that Wheeler rejected a suggestion from agency analysts to lower to conventional biofuel level from the current 15 billion gallons to around 14.3 billion gallons.

EPA typically issues their proposed RFS marks in late-June/early July with a goal of finalizing those levels by November 30.

Washington Insider: E15 Ethanol Rule Fight

Bloomberg is reporting late this week that key federal agencies are “bickering” over an increased use proposals for ethanol. The context is the president’s pledge to his rural agricultural base to allow year-round sales of higher blends of ethanol, which appears to be spurring differing opinions between two key federal agencies.

Earlier, USDA Secretary Sonny Perdue told lawmakers in a House hearing that a final rule to allow widespread sales of higher ethanol blends won’t happen by the summer-driving season.

That sparked a swift response from the Environmental Protection Agency, which is writing the regulation and insists the measure is on track. “EPA is planning on releasing its RVP/RIN market reform proposal in March and working expeditiously to propose and finalize the rule consistent with the president’s direction before the start of the summer driving season,” agency spokesman Michael Abboud said.

Bloomberg notes that rural Midwest voters are pushing the administration to move quickly to allow year-round sales of E15, a blend of gasoline comprised of 15% ethanol. That ratio currently is restricted on fuel in some areas during the summer months. Trump told Iowa voters in the autumn that he had signed a memo telling EPA to lift summertime restrictions on the fuel.

However, the government shutdown halted work at the EPA, Bloomberg says, stoking skepticism across the Midwest Corn Belt that the administration will have the measure in place this summer to meet peak fuel demand. It notes that “the slumping farm economy has struggled during the U.S. trade war with China that has damped exports of ethanol, soybeans and other agricultural goods.

Perdue’s comments came just before the Senate held a procedural vote to advance acting EPA chief Andrew Wheeler’s nomination to be the agency’s administrator. Wheeler has focused on damping down lawmaker concerns on biofuel policy.

Within hours, Perdue had backtracked and was taking pains to assure the public that the E15 rulemaking was happening on schedule. “Great seeing @EPAAWheeler here at @USDA,” Perdue tweeted Wednesday afternoon. “Appreciate him moving expeditiously to finalize E15 rule before the start of summer driving season.”

In his earlier congressional testimony, Perdue said he’s pushing EPA to make an announcement “soon” on “discretionary enforcement” for gasoline stations that sell the higher blends, signaling they wouldn’t face penalties for offering E15 this summer even if the rule isn’t finalized.

Last week, Nebraska Governor Pete Ricketts, a Republican, expressed doubt that EPA would have the measure in place by the start of summer, but was hopeful that it could still be rolled out at some point during the season.

The ethanol debate pits blue collar oil workers against farmers producing the crops used to make biofuel, spurring a ruckus between two of the president’s main constituencies, Bloomberg says.

Biofuel advocates on Wednesday had blasted the possible delay. Renewable Fuels Association President Geoff Cooper called it a “gut punch” if true.

“The year-round E15 provisions are straightforward, and there is no reason they could not be promulgated by this summer,” Cooper said. The group has asked the EPA to separate out more complicated provisions in the plan targeting biofuel compliance credits.

“We appreciate EPA’s clarification on the E15 rulemaking timing,” Leigh Claffey, a spokeswoman at the industry trade group Growth Energy, told Bloomberg. “However, it is imperative that EPA follow through on its commitment to allow year-round E15 in time for the summer driving season. American farmers and biofuel producers are counting on it.”

So, it is hard to tell exactly what is going on regarding the proposed modification of the renewable fuel standards, but producer groups—including the Secretary—seem willing to push back hard against concerns that administration policy might contain bad news for grain producers.

Clearly, ag sector support for renewable fuels is still strong even though environmental concerns and feed cost impacts have raised questions in some quarters. It now seems that EPA is on board with the necessary rule changes to support wider use of E15, but that still is likely to be a process producers should watch closely as it proceeds.

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