Opponents come together to pitch ethanol deal

Billionaire investor Carl Icahn and the leading U.S. biofuel trade group have proposed a deal to the Trump administration for revamping the Renewable Fuel Standard - giving both parties long-sought changes to the regulation, according to people familiar with the agreement.

The parties came together to present the White House with a memorandum containing draft language it could use to direct the Environmental Protection Agency to make the adjustments. A presidential memorandum could come sometime soon.

As majority owner of refiner CVR Energy Inc. and also a regulatory adviser to President Donald Trump. Icahn has pushed to shift the burden for complying with biofuel quotas from refiners to fuel blenders.

Now he and other refiners have the support of a major ethanol trade group to shift the point of obligation - as it's known in the industry - in exchange for loosening regulations that restrict sales of a more aggressive ethanol blend over the summer.

Iowa is the nation's leading producer of the corn-based ethanol. Earlier this month, Iowa Sens. Chuck Grassley and Joni Ernst joined others in urging the EPA to reconsider rules that make it harder to sell ethanol above 10 percent.

Under the deal, the association would agree to change the point of obligation in exchange for a pledge to allow gasoline blends containing 15 percent ethanol - called E15 - to be sold year-round in U.S. markets.

'I was told in no uncertain term that the point of obligation was going to be moved, and I said I wanted to see one of our top agenda items moved,” Bob Dinneen, head of the Renewable Fuels Association said in a phone interview. A waiver ensuring year-round access to E15 would 'greatly expand the market opportunities for ethanol, and I think it is a darned good thing for our industry.”

In a statement later, Dinneen stressed the group was 'told the executive order was not negotiable.

The EPA has resisted allowing E15 to be sold over the summer in areas without access to a low-volatility gasoline. The rationale is that E15 would exceed the summer limit on how easily it changes to vapor.

But Midwestern political leaders maintain there is no scientific evidence to support that.

Even without the White House officially embracing the proposal so far, it faces backlash from the American Petroleum Institute, the biggest lobbyist for the oil industry, and POET, the biggest ethanol producer. While Trump could act on this mostly without Congress, political pressure may force him to think twice.

Just this month, the Renewable Fuels Association filed comments with the EPA opposing the change in the point of obligation. The Iowa Renewable Fuels Association opposed it, too.

'Let me make this perfectly clear: changing the point of obligation is most definitely messing with the RFS in a significantly harmful manner,” wrote Monte Shaw, director of the Iowa group in a Feb. 16 statement.

Another opponent of the shift wrote in a statement that 'it does not make sense to change the monitoring of renewable fuel use from 50 large refiners to 100,000 or more independent retailers.”

Changing the burden 'will create a significant bureaucratic burden on these retailers and it will be an auditing nightmare for the EPA,” wrote Delia Moon, president of Truckstops of Iowa.

But now under the proposed deal, the Renewable Fuels Association's support could help win backing from corn growers and Midwest voters who helped elect Trump last year.

Shifting the compliance burden also is important to another key Trump constituency: laborers in Pennsylvania who supported him last November. Advocates of the change argue that some refineries there are imperiled by the rule.

The proposed deal also aims to curb imports of biodiesel from Argentina by ensuring domestic producers qualify for a currently expired tax credit. But that would require action from Congress, where the tax credit is up for renewal.

Bloomberg and staff of The Gazette contributed to this report.