Trump under pressure to alter ethanol policy

On Wednesday, Texas Sen. Ted Cruz held a rally at a bankrupt refinery in Philadelphia, telling hundreds of oil workers that enforcement of the Renewable Fuel Standard is to blame for their financial woes.

'For the working men and women of this country, they should have a federal government that is standing with them rather than fighting against them,” Cruz said.

A day later, Reuters learned that President Donald Trump has summoned key senators - including Cruz and Iowa's Chuck Grassley and Joni Ernst - and several Cabinet officials to a meeting Tuesday to talk about potential changes to the nation's biofuels policy.

The meeting comes as the powerful oil and corn lobbies clash again over the future of the Renewable Fuel Standard, a decade-old regulation that requires refiners to cover the cost of mixing biofuels such as corn-based ethanol into fuel.

Trump's engagement reflects the high political stakes of protecting jobs in a key electoral state while balancing the interests of farmers who supported him but are wary of what stance he'll ultimately take on two issues vital to the rural economy - ethanol and North American trade.

Iowa Republicans thought they already won this battle last October, when Trump intervened to make sure the Environmental Protection Agency didn't back away from targets for blending biofuels. He called Gov. Kim Reynolds to say he was committed to the rule.

But that was before oil refiner Philadelphia Energy Solutions, which employs more than a thousand people in Philadelphia, declared bankruptcy last month and blamed the regulation for its demise.

Besides the senators, the meeting will include EPA Administrator Scott Pruitt, Agriculture Secretary Sonny Perdue and maybe Energy Secretary Rick Perry, according to four sources cited by Reuters, who asked not to be named because they were not authorized to speak publicly.

One said the meeting would focus on short-term solutions to help the Pennsylvania refiner. It is asking a bankruptcy judge to shed $350 million of its compliance costs, owed to the EPA.

The other sources said the meeting will consider whether to cap prices for biofuel credits and let higher-ethanol blends be sold all year.

In a Feb. 7 statement, Grassley said it was a 'baseless rumor” that the Renewable Fuel Standard was to blame for the Pennsylvania refiner's bankruptcy. Instead, he said, the refiner chose to comply by purchasing credits rather than by investing in the capacity to blend in renewables.

'That hasn't worked out very well for (Philadelphia Energy Solutions) apparently, but that was the bet it made,” he said in the statement.

The offices of Cruz, Ernst and Grassley did not return requests Friday for comment.

The Trump administration has considered changes to the fuel standard sought by refiners - including shifting the responsibility for blending to supply terminals - only to retreat under pressure from the corn-state lawmakers.

But to force such a meeting as is now being planned to revisit the policy, Cruz has been holding up the nomination of Iowa Agriculture Secretary Bill Northey to a key Agriculture Department post and stumping - like he did this week at the refinery - about the issue.

The EPA is expected to weigh in officially in the coming weeks on the Pennsylvania refinery's request to the bankruptcy judge to be released from its compliance obligations. But any such move would likely draw a backlash from other refiners, who have no hope of receiving a waiver.

Under the fuel standard, refiners must earn or purchase blending credits called RINs to prove they are complying with the regulation.

As biofuel volumes quotas have increased, so have prices for the credits - meaning refiners that invested in blending facilities have benefited while those that have not, such as the Pennsylvania refinery, have had to pay up.

But other issues may also have contributed to its difficulties. Reuters reported the operation's backers withdrew from the company more than $594 million since 2012, even as regional refining economics slumped.

Reuters contributed to this report.