(Bloomberg) -- President Donald Trump on Thursday outlined changes to U.S. biofuel laws that would allow more ethanol to be used, a nod to farmers caught in the crosshairs of a potential trade war with China, while also offering some relief to fuel suppliers who have complained about compliance costs.
Allowing the year-round sale of fuel containing as much as 15 percent ethanol, a blend known as E-15, “makes a lot of farmers happy," Trump said prior to a White House meeting with Republican lawmakers from farm states. “We’re going to also be helping the refineries," he added.
Trump has held a series of meetings in recent months to carve out a biofuels deal that satisfies the agriculture and oil lobbies, which also happen to represent two of his most important constituencies: farmers in the rural Midwest and blue-collar workers in industrial areas.
The two sides have clashed repeatedly over the Renewable Fuel Standard, a complicated policy that crosses political lines. Oil industry representatives have cited the January bankruptcy of Philadelphia Energy Solutions Inc., the largest U.S. East Coast oil refiner, as evidence that the biofuel mandate is too costly and changes are needed.
However, ethanol is immensely popular with farmers because it’s largely derived from corn. Agricultural interests argue that any weakening now of requirements to use ethanol would compound the uncertainty felt by farmers after China last week outlined a retaliatory tariff on U.S. soybeans.
On Wednesday, U.S. Agriculture Department Secretary Sonny Perdue said farmers are feeling anxiety not only from the possible trade war with China but also because the U.S. Environmental Protection Agency is issuing hardship waivers to some small refineries, allowing them to avoid complying with the RFS.
Another issue is the price of Renewable Identification Numbers, or RINs, the tradeable credits used to show compliance with the RFS. Refiners have raised concerns about their cost. Some have asked the Trump administration to cap RIN costs, possibly with the EPA selling a lower-priced alternative: an ethanol waiver credit not tied to a blended gallon.
“EPA has been assessing the legal validity of granting an E-15 waiver since last summer,” EPA spokeswoman Liz Bowman said in a statement Wednesday. “The Agency has been awaiting a clear outcome from the ongoing RFS discussions with the White House, USDA and Congress before making any final decisions or developing any associated regulatory actions.”
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