Worries Over EPA E15 Rule

SIOUX FALLS, S.D. (DTN) -- Agriculture Secretary Sonny Perdue on Thursday touted President Donald Trump's push for year-round E15 and getting trade deals done. But ethanol champions expressed concern about uncertainty of EPA rule-making while farmers also voiced worries about income and finances to the secretary.

Perdue was in South Dakota on an official business trip with the state's congressional delegation, but his visit drew a lot of media attention and highlighted rural support for Rep. Kristi Noem, a Republican who is in a tighter-than-expected race for governor.

Perdue, Noem and Sen. Mike Rounds toured Poet Biorefining - Chancellor with a roundtable focused on year-round E15 before joining Sen. John Thune at a question-and-answer session with producers at a nearby farm.

On a couple of key issues for farmers, the secretary told reporters at the events that there will be a second tranche of Market Facilitation Program payments for producers -- the "trade aid" program created to offset low prices. Perdue said there had been reports suggesting the second round of payments wasn't coming and he wanted do dismiss those concerns -- though no date is set for when those payments might be announced.

The Secretary also told DTN that USDA is looking to possibly revise the MFP to factor in devastating hurricanes that hit this fall.

"I've asked our staff to look at the fact we believed the payments should be based on actual production and not county averages ... but I think we've got to look at situations where people had crops that were good crops that were totally obliterated," Perdue said, pointing to crops such as cotton that were wiped out. "These safety-net programs don't contemplate that, and I think if Congress is generous enough to give us another supplemental regarding a disaster program for Hurricane Florence and Michael, then we need to look at those kind of considerations."

The E15 waiver announced earlier this month by President Trump would eliminate the summer ban on 15% ethanol blends that now runs from June to mid-September. That waiver is not a mandate to sell the fuel, but the summer ban has been blamed as one reason retailers have been reluctant to sell E15, knowing they would have to stop selling it more than three months out of the year.

Perdue characterized the president's position on E15 as a matter of "promises made, promises kept," though EPA isn't expected to propose a rule on E15 until possibly February and legal challenges are expected.

"This is something really I thought would happen a lot earlier because I know it was something he (Trump) wanted to do, but we had some dust-up with the petroleum industry," Perdue said.

Brian Jennings, CEO of the American Coalition for Ethanol, credited Perdue as "the strongest champion" for E15, but Jennings also noted the refinery waivers have done as much damage to ethanol prices as a 10-cent price cap on Renewable Identification Numbers (RINs) pushed by the petroleum industry and some oil-state lawmakers.

"The small-refinery exemptions have absolutely collapsed the price of those RINs," Jennings said. He also reiterated concerns by Sen. Charles Grassley, R-Iowa, that EPA is "slow-walking" the rule-making process. Jennings expressed his own doubts EPA could get an E15 rule done in four months.

"That would be a land-speed record," Jennings said. "Most EPA rules take well over a year."

Jennings called on biofuel advocates in Congress and in the Trump administration to get EPA to speed up the rule so it is done before next summer.

Jeff Broin, CEO of Poet, also expressed concern about the timing of the EPA rule, but he also said the most important element "is to get it right and make sure it is legally defensible." Broin had earlier talked about the opportunity E15 presented to reduce commodity surpluses and improve air quality in cities.

"Two billion bushels in new demand is huge for American farmers. Two billion bushels will bring down worldwide surpluses, raise prices to a sustainable levels, which they aren't today, and impact the state budget of every state in the Midwest," Broin said.

Perdue acknowledged his own frustration with the pace of federal rulemaking.

"I hear you. I understand the anxiety," Perdue said. But the secretary added he is "absolutely convinced Acting EPA Administrator (Andrew) Wheeler wants to make this happen in time for next year driving time in May."

Perdue added that Wheeler also recently said he's confident EPA's rule would hold up in court, and the secretary pointed specifically to the legal problems with revoking the EPA's waters of the U.S. rule as one of the reasons not to rush the E15 rule.

Perdue also said he will continue working with EPA on the small-refinery waivers that have reduced required biofuel use by nearly 2 billion gallons of ethanol, gauging corn demand in the process. Perdue said the waivers need to be more transparent as well. "Now we've got to look at the right balance here."

Farmers at the Poet event also told the secretary about the value of ethanol to their operations. Scott Stahl, a farmer from Emery, South Dakota, said he would not be farming without the ethanol market.

"I look at the RFS and now E15 as probably the greatest farm policy to come out of Washington, D.C., since the REA (Rural Electrification Administration), for what it has done for the infrastructure and the economy in my area," Stahl said. "I see a lot more farmers my age (32), more farmers in their 30s -- kind of a revitalization -- and more people coming back to the farm, allowing schools to expand and seeing more Main Street America really be able to thrive, and I believe that's all because of the ethanol industry."

The secretary also said programs to support biofuel infrastructure, such as pumps, will be needed once year-round E15 goes into effect to help encourage consumers to use the products, and in time "you'll see E15 pumps in Georgia just like you do out here."

After touring the Poet plant, Perdue and the congressional delegation held a town hall meeting at a nearby farm. Questions ran the gamut of topics from Chinese trade to lab-based meats and the importance of getting the farm bill done.

Scott VanderWal, vice president of the American Farm Bureau Federation, told Perdue he is concerned about farmers, especially seasoned farmers, quitting because of potential problems with loan renewals.

"There's a general concern out there when you talk to bankers, especially young farmers and ranchers who don't have so much capital built up," VanderWal said. He noted especially the low prices for soybeans right now that show basis $1 to $1.30 in the state. "Then there are a lot of older folks in their 60s who see their equity eroding and thinking 'I may just hang it up and keep that.' So I'm hearing a fair amount of concern from bankers who have long-term relationships with farmers, and the last thing they want to do is sit across the desk and say, 'We've had a great relationship, but it's just not working anymore.'"

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)

Copyright 2018 DTN/The Progressive Farmer. All rights reserved.