Farmers See an Ethanol Win

OMAHA (DTN) -- As President Donald Trump headed to Iowa late Tuesday to announce year-round E15 and campaign for Iowa Republicans, there were questions over when EPA would propose such a rule and the expected legal challenges from biofuel critics.

Trump talked to reporters outside the White House about a range of topics, but touched upon his trip to Council Bluffs and year-round sales of 15% ethanol before he headed to the rally.

"We are heading out to Iowa where we have a big statement to make, as you know, on ethanol and for our farmers," Trump said, "Likewise we are taking care of our refineries and our refiners and they have done a fantastic job but we want to get more fuel into the system, and this is a great thing. This is great for our farmers. It is a promise I made during the campaign and as you know I keep my promises."

Trump also noted, according to Associated Press, "It's an amazing substance. You look at the Indy cars. They run 100% on ethanol."

A WIN FOR FARMERS

Kelly Nieuwenhuis, a member of the Iowa Corn Promotion board of directors and a northwest Iowa corn farmer, called the president's actions simply "a win" for corn farmers such as himself who have been looking for some positive moves in corn demand.

"As a farmer, we want markets for our products and we feel this is a great opportunity to grow markets and grow our biofuels demand and when that happens that grows our corn demand," Nieuwenhuis said on a press call. He added, "Any time can have some growth in our markets running our corn through biofuel refineries -- as a farm operator, 95% of the corn I produce gets sold to a corn ethanol plant -- so if we can fill the demand for biofuels and get that shipped out we're going to be moving our corn faster."

Nieuwenhuis said the figures on how much more demand year-round E15 could generate "are all over the place." He indicated he had heard as much as 2 billion bushels higher for corn, but Nieuwenhuis added, "We know that's not going to happen overnight."

Trump met Tuesday afternoon with several Midwest Republican lawmakers including Sens. Joni Ernst and Charles Grassley, both of Iowa, as well South Dakota Sen. John Thune, and Sen. Deb Fischer of Nebraska, as well as Rep. David Young whose district Trump was holding the rally in Tuesday evening.

Thune noted he had first called for the E15 waiver as far back as 2007. He joined 17 other senators last spring who called on EPA to deal with the volatility measure on fuels, known as Reid vapor pressure, which was blocking year-round sales of the fuel blend.

"As I have discussed personally with the president and members of his administration on multiple occasions, today's announcement will be welcome news to farmers throughout the Midwest and Great Plains," Thune said. "Since year-round E15 sales would naturally help lower fuel prices, this also means consumers across the country will have more affordable choices at the pump, in addition to reinforcing American energy dominance."

MORE CHOICES FOR CONSUMERS

Agriculture Secretary Sonny Perdue said the E15 decision keeps with Trump's view of unleashing American energy production. "Consumers will have more choices when they fill up at the pump, including environmentally friendly fuel with decreased emissions," Perdue said. "It is also an excellent way to use our high corn productivity and improved yields. Year-round sale of E15 will increase demand for corn, which is obviously good for growers."

EPA did not respond to questions about when the agency would initiate a rule proposal on year-round E15. Ethanol industry leaders said they think the announcement by EPA "could come in days or weeks." In the past, EPA has asserted in Federal Register rules on 15% blends that the agency did not have authority to waive the Reid vapor pressure requirement. Under current rules, retailers must not sell E15 from June 1 to Sept. 15 except for flex-fuel vehicles.

Coupled with year-round E15, EPA officials will also have to draft new rules making the market for Renewable Identification Numbers more transparent with some possible restrictions on who may hold RINs and how long a refinery company or others may hold onto RINs before putting them out on the marketplace. Those details also will need to be drafted in a federal rule.

QUESTIONS ABOUT DEMAND

Not everybody sees significantly higher corn demand, especially in the short term. Scott Irwin, a University of Illinois agricultural economist, said on a podcast he did not see E15 as a significant demand boon for corn, noting that the waiver would only increase sales in summer months. Irwin said the impact would amount to "a rounding error in aggregate corn statistics."

Emily Skor, CEO of the biofuels lobby group Growth Energy, said retailers have largely sat on the sideline waiting for the opportunity to sell E15 year-round. More retailers will now take advantage of the opportunity to start selling the fuel blend.

"Just that market signal is incredibly important, because it's the uninterrupted E15 that's going to change the fuel-purchasing experience," Skor said. She added, though, "History does show that oil companies will ignore the economic incentives just to prevent market entry."

LAWSUITS EXPECTED

Skor said biofuel advocates expect critics from the petroleum industry, and possibly some environmental groups, to file lawsuits against any EPA rule once it's finalized. Resistance to the ethanol industry largely focuses on competitive forces over market share, she said.

"That's something we have heard from those who oppose year-round sales of E15 before and I would say litigation is something that is pretty common with the RFS (Renewable Fuels Standard) and the annual RVOs (renewable volume obligations)," Skor said. "The White House in their comments yesterday said they were confident this would withstand a legal challenge. We see it the same way on our side. We know EPA spent a lot of time already preparing for this day and preparing for the rule-making."

Brian Jennings, CEO of the American Coalition for Ethanol, reiterated that view, saying the petroleum industry will work on "stonewalling" year-round E15 "so we encourage Acting EPA Administrator Andrew Wheeler to expeditiously publish a legally-defensible approach for extending RVP relief to E15 in the Federal Register for public comment and to finalize the rule before the 2019 low-RVP season kicks-in."

Geoff Cooper, president and CEO of the Renewable Fuels Association, thanked Trump "for formally initiating the process to eliminate this antiquated, red-tape laden regulation, and look forward to the full resolution of this issue before next summer's driving season. This is the right signal to the marketplace at just the right time, as both farmers and renewable fuel producers desperately need new market opportunities and sources of demand."

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

Follow him on Twitter @ChrisClaytonDTN

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