Larry Kudlow Hatching New Plan to Boost Biofuel Mandates

Kudlow Takes on RFS 120619
E85 Pumps ( Charles Johnson )

(Bloomberg) -- White House economic adviser Larry Kudlow is developing a new plan to bolster biofuel-blending requirements after ethanol allies in politically important farm states complained the current proposal doesn’t do enough to compensate for waivers exempting some small refineries from the mandates.

Kudlow’s involvement was described by five people familiar with the matter who asked not to be named discussing the administration’s private deliberations. The effort comes after biofuel producers, corn farmers and Midwest politicians blasted the Environmental Protection Agency’s current approach as inadequate, saying it flouted the terms of an Oct. 1 agreement to raise biofuel-blending requirements enough to fully offset refinery exemptions.

Biofuel allies say there’s no guarantee EPA’s formal proposal will completely offset those exemptions because adjustments would be based on recent Energy Department recommendations for waivers, not the higher amount that the EPA has actually granted.

Even if EPA leaders have the best intentions, “farmers don’t believe it” because of the agency’s track record, Senator Chuck Grassley, a Republican from Iowa, said Tuesday. “Even if your heart is in the right place, your regulation has to show that.”

The news gave a brief boost to ethanol producers. Green Plains Inc. rose as much as 2.78% and was trading up 7 cents at $14.84 at 11:30 a.m. Pacific Ethanol Inc. pared earlier losses.

The Trump administration has struggled to find a balance between competing oil and biofuel industry interests on the issue. Some previous ideas, once embraced by administration officials, were discarded after criticism from the sectors.

Oil industry leaders have portrayed the EPA’s plan as illegal, arguing it would unfairly force large refineries to bear a disproportionately higher burden of biofuel-blending requirements.

Kudlow, who has been spearheading work on the issue in the White House for months, is now working with EPA officials to develop the new methodology, according to one of the people familiar with the matter.


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