Under pressure from U.S. lawmakers in farming states, President Donald Trump has abandoned an overhaul of biofuels policy aimed at reducing costs for the oil industry, sending U.S. renewable fuel credit prices soaring more than 40 percent on Wednesday.
The White House had been poised to announce proposed changes to the U.S. Renewable Fuel Standard (RFS) this week after hosting months of difficult negotiations between representatives of Big Oil and Big Corn, but delayed the announcement indefinitely, two sources familiar with the matter said late on Tuesday.
Trump abandoned the efforts on Tuesday after learning that farmers in the important Midwestern constituency were uneasy with part of the proposal, one of the sources said. This was confirmed to Reuters by another source on Wednesday.
Pressure to reform the program eased in recent weeks as the U.S. Environmental Protection Agency took steps that resulted in significantly lower compliance costs for merchant refiners.
The White House and the EPA did not immediately respond to requests on Wednesday for comment on the policy suspension.
Ethanol groups Growth Energy and the Renewable Fuels Association praised the move.
Renewable fuel credit prices traded as high as 29 cents early Wednesday on the news, up from 20 cents Tuesday afternoon, traders said. Prices eased back to 26 cents midmorning.
The RFS requires oil refiners to mix increasing volumes of biofuels like ethanol into fuel each year, and prove compliance by earning or acquiring the credits and handing them in to the Environmental Protection Agency.
ARTICLE CONTINUES BELOW ADVERTISEMENT
The law has helped corn farmers in the Midwest by creating a 15-billion-gallon-a-year market for ethanol, but refining companies have complained that compliance costs are too high and threaten the type of blue-collar jobs Trump has promised to preserve.
The White House deal would have eased pressure on the refining industry by allowing biofuels exports to count toward the annual volumes quotas. It would also have expanded sales of high-ethanol gasoline, in a concession to biofuels producers.
Republican Senators Chuck Grassley and Joni Ernst of corn state Iowa both praised Trump on Twitter on Tuesday evening for dropping the export plan — which they had argued would have cut into domestic demand for ethanol.
But oil companies also have reason to cheer.
Despite Wednesday’s spike in renewable fuel credit prices, they are down sharply since late last year after Trump’s EPA handed out an unusually high number of waivers exempting small oil refineries from the RFS on the grounds complying would have caused them financial stress.
That decline has saved the oil industry billions of dollars in compliance costs, according to a Reuters analysis.