Washington Insider -- Thursday

EPA Moves on Ethanol Mix

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

OIG Probe On Perdue's Plan To Relocate ERS Hot Topic At House Hearing

The proposed Economic Research Service (ERS) relocation and a massive meat recall were some of the issues raised with the USDA Office of Inspector General (OIG) at a House Appropriations subcommittee hearing Tuesday (March 12).

The subcommittee was anxious to hear an update on a report into the rationale and cost justification of realigning ERS under the chief economist office and relocating ERS and NIFA offices. In November, Reps. Steny Hoyer, D-Md., and Eleanor Holmes Norton, D-D.C., asked USDA’s Inspector General to review the management shake-up.

USDA's in-house watchdog has nearly completed the field investigation for its 2019 probe, USDA Inspector General Phyllis Fong said during the one-hour hearing. The next step is to start reaching out to stakeholders and drafting recommendations.

USDA this week published a new list of candidate locations for the move.

Rep. Chellie Pingree, D-Maine, who opposes the change and has offered legislation to prevent it, said Tuesday that people want to know why this is going forward and floated a new issue for OIG to explore at the hearing.

Stakeholders allege the reorganization is being pursued because the research was “not aligned” with the current administration on issues such as the Supplemental Nutrition Assistance Program (SNAP) and climate change, Pingree said. She asked whether OIG was looking into these allegations.

Fong said this was new information and currently not part of the scope of the study. But because OIG had not heard about the new allegation, OIG would be interested in finding out more, she said.

EU And US Reach Tentative Agreement on Beef Quotas

After months of negotiations, Brussels and Washington have reached an "agreement in principle," which would see the EU ring-fence part of its hormone-free beef quota for U.S. suppliers.

A Commission spokesperson told IEG Policy the mutually agreed way forward includes a “U.S.-specific allocation” for part of the annual 45,000 metric ton quota volume.

It is not yet clear how much will be reserved for U.S. suppliers, but various sources have previously speculated it could be between 30,000 and 35,000 metric tons.

This would leave between 10,000 and 15,000 metric tons for all other eligible countries, which include Australia, New Zealand, Uruguay and Argentina.

“The draft agreement in principle has been communicated by the European Commission to the European Parliament and to EU Member States,” the spokesperson confirmed, adding that “member states are requested at this point (only) to endorse the European Commission's approach”.

The U.S. has long been unhappy with how much of the so-called ‘481’ beef quota is taken up by rival suppliers – given that it was originally created as a solution to a dispute between Brussels and Washington.

Faced with the threat of retaliatory sanctions, the European Commission first signaled its willingness to renegotiate quota arrangements in early 2018.

Washington Insider EPA Moves on Ethanol Mix

EPAs’ plan to increase ethanol mix in gasoline is moving forward. On Tuesday, the agency announced a new plan to raise the mandate for ethanol use in gasoline across the US, a move pushed by corn farmers but expected to draw ire from the oil and gas industry.

The latest step proposes to allow the year-round sale of gasoline blended with up to 15% ethanol which previously was restricted under air pollution requirements between June 1 and Sept. 15. That rule reflected studies that show burning ethanol in warmer temperature leads to heightened ground-level ozone pollution and smog. The new plan will effectively lift those sales barriers.

Also under the plan, the administration will make it harder for refiners to trade credits for biofuel use. Currently, refiners and importers of natural gas must blend their fuels with ethanol before sale or they can simply purchase Renewable Identification Numbers (RINs) sold on the market.

The proposed reform would include requiring public disclosure of RIN, limit the length of time that non-refineries or importers can hold a RIN and improve compliance obligations on a more frequent basis.

The White House last October directed the EPA to initiate a rulemaking to expand waivers for E15 and change way RINs were traded on the market. Tuesday’s proposed rule very closely resembles the plan put forth by the administration.

EPA said it will be looking for public comment on the rule and will hold a public hearing March 29.

“Consistent with the President’s direction, EPA is working to propose and finalize these changes by the summer driving season,” EPA Administrator Wheeler said.

President Trump has long hinted at his plans to expand the ethanol market, and the ethanol industry has long pushed for a waiver that would allow fuel stations to sell E15. Currently, most gasoline sold in the U.S. contains 10% ethanol, with about 1% of filling stations selling E15.

Former EPA Administrator Scott Pruitt had planned to allow E15 sales year-round as part of a deal between oil and corn interests to change how the administration enforces the federal mandate to blend ethanol into gasoline.

But that deal fell apart amid corn-state opposition to allowing ethanol exports to count toward the federal mandate, effectively reducing the mandate.

The ethanol industry hailed the new administration plan, calling it a cleaner fuel choice for Americans.

“This rule is a critical milestone for rural Americans who make renewable biofuels and for all American drivers, who may soon have a cleaner, more affordable, higher-octane fuel all year long,” said Growth Energy CEO Emily Skor.

Supporters called the move a win for farmers. “With ethanol plants shutting down or idling and farmers experiencing the worst conditions in more than a decade, removing the summertime ban on E15 once and for all would send a desperately needed signal to the marketplace,” said the Renewable Fuels Association.

The American Petroleum Institute pushed back, calling the decision a “lose-lose” for American consumers. “The administration needs to scrap this anti-consumer policy that exacerbates problems with the failed Renewable Fuel Standard,” said Frank Macchiarola, API's vice president of downstream and industry operations.

“Studies have shown that E15 gasoline can damage vehicle engines and fuel systems—potentially leaving Americans to pay expensive car repair bills due to bad policy out of Washington.”

The move is certainly popular among farmers and that was likely the reason for the recent proposal. Overall, however, ethanol policies have generated less support among producer groups than was once the case, especially during periods when feed prices are pressing on livestock and dairy producers. Support among environmentalists also has declined sharply in recent years.

The renewable fuel mandates nowadays are increasingly mentioned in political debates, often prominently so, and likely will be once again as the next campaign draws nearer. These will be among issues producers will continue to watch very closely as the coming political battles intensify, Washington Inside believes.

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