OMAHA (DTN) -- No deal was struck between senators and the Trump administration Tuesday at a White House meeting centered on proposed changes to the Renewable Fuel Standard, but two Iowa Republican senators in attendance said the fight will go on.
In what was a whirlwind day for the agriculture and ethanol industries, President Donald Trump requested a meeting with ethanol industry officials this week -- possibly on Thursday -- to get the industry's side of the story and to explore possible areas of common ground on the RFS.
Though Sen. Ted Cruz, R-Texas, released his hold on Bill Northey's nomination to a USDA post, it doesn't mean he conceded the fight to reform the RFS law. The Senate voted to confirm Northey on Tuesday.
"No deal was made," Sen. Charles Grassley, R-Iowa, who was joined by Sen. Joni Ernst, R-Iowa, said in a news conference following the meeting. "I think that was a big deal. There were no assurances or commitment not to change the RFS. It is the status quo. The president wants to visit with people in the biofuels industry. When we say it's going to hurt ethanol, you can see why the president may have some concern about it."
Grassley, Ernst, Cruz and Sen. Pat Toomey, R-Pa., met at the White House with Trump, U.S. Secretary of Agriculture Sonny Perdue, and U.S. Environmental Protection Agency Administrator Scott Pruitt. Grassley and Ernst said the meeting did little to change the ongoing RFS fight.
"We made it clear we would not support anything that would put jobs in the renewable fuels industry in jeopardy," Ernst said. "It will be a long road ahead."
Cruz said in a news release following the meeting that he believes progress was made.
"I believe we are likely to arrive upon a win-win solution that (1) stops the RINs system from imposing billions in unnecessary costs for refineries and threatening the jobs of tens of thousands of blue-collar union workers," he said, "and (2) expands the potential market for ethanol, allowing corn farmers to sell substantially more corn each year." (To read Sen. Cruz's entire statement, visit http://bit.ly/…)
Grassley said the president made the same request following a similar meeting in December -- for ethanol supporters to work with Cruz to find a win-win solution for both the ethanol and oil industries.
Cruz floated an idea to cap the price of renewable identification numbers, or RINs, in order to control the costs for refiners and other obligated parties to comply with the RFS. Obligated parties can either blend actual biofuels or buy biofuel credits to comply.
Last week, Cruz joined a rally at the now-bankrupt Philadelphia Energy Solutions refinery on the East Coast. PES claimed in a Chapter 11 bankruptcy filing that its financial trouble was the result of about $832 million in RFS compliance costs. Cruz held up PES as a poster child for RFS reform, although numerous studies have shown the refiner had management and other issues that hurt the bottom line.
Despite those studies, Grassley said there seems to be a "dispute" within the Trump administration about whether capping RINs would hurt the ethanol industry. Ernst said she has yet to see any independent studies suggesting RIN prices harm small refiners.
Grassley said the ethanol industry would like to see year-round E15 sales, while Cruz continues to suggest reform to prevent speculation on RIN markets.
"But all of these are rendered useless if a cap or waiver is proposed," Grassley told reporters.
When asked if Cruz's release of the Northey nomination is an indication the senator is backing off his RFS pursuits, Grassley said, "I wouldn't expect Sen. Cruz to back off of any position he has on any subject."
Ernst agreed. "We're going to be fighting this out," she said.
Not long after the White House meeting adjourned, Trump tweeted his support for Cruz on his March 6 re-election bid. "I want to encourage all of my many Texas friends to vote in the primary for Governor Greg Abbott, Senator Ted Cruz, Lt. Gov. Dan Patrick, and Attorney General Ken Paxton. They are helping me to Make America Great Again! Vote early or on March 6th," Trump tweeted.
ETHANOL, AG REACTION
Ethanol industry leaders already were slated for a panel discussion this week at Commodity Classic and the National Corn Growers Association's Corn Congress in Anaheim, California. There was a sigh of relief from corn farmers and ethanol leaders that the White House reportedly held firm on the RINs issue for now.
Kevin Skunes, president of NCGA and a North Dakota farmer, noted that corn farmers are losing an average of $10 an acre on their crop. Farmers can't afford policy shifts that hurt corn demand, Skunes told reporters.
"Our farmers cannot afford any deal that undermines demand for ethanol," Skunes said.
Bob Dinneen, president and CEO of the Renewable Fuels Association, said there is no deal on RFS changes despite an oil industry narrative to the contrary.
Ethanol production is expected to top 16 billion gallons in 2018, he said, satisfying both the RFS and the export markets.
"Now is not the time to be letting off the gas," Dinneen said. "We've got some real challenges in front of us. The foundation of that demand is the RFS, which is under attack because you've been successful."
With the release of the hold on Bill Northey's nomination, Dinneen said, all Cruz got for his efforts was a meeting at the White House.
"I don't believe it was a quid pro quo other than Ted Cruz giving into a whole lot of pressure," Dinneen said.
Chris Novak, CEO of the National Corn Growers Association, also panned the idea of attaching RINs to exports. Trade partners would construe that as an export subsidy.
"Essentially, when you do that you are subsidizing your exports, which is vulnerable to WTO (World Trade Organization) challenges," Novak said.
Brian Jennings, CEO of the American Coalition for Ethanol, said the refining industry is divided regarding possible changes to the RFS, largely because most of the industry has been able to work with the RINs market as well as ethanol supplies. He said allowing year-round E15 sales would cure many ills in the market.
"The quickest way to increase the supply of RINs is RVP relief," Jennings said.
Jennings also noted a 60-cent RIN price provides demand for ethanol and pays for infrastructure to get higher blend levels to consumers.
There needs to be a long-term plan to ensure demand for higher-octane, low-carbon biofuels, he said. That's the only way to increase demand through mid-level biofuel blends. Right now, however, the Trump administration doesn't seem ready to advance those rules.
"The leadership at EPA and the leadership in the administration need to buy into this as a future priority and they are not there yet," Jennings said.
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