Ethanol industry searches for allies in Washington

Despite President Donald Trump's campaign vows to support American ethanol producers, the $24 billion corn-based ethanol industry finds itself short on allies in the new administration.

Trump's nominees to lead the three agencies that have the most interaction with the industry have either criticized the nation's biofuel mandate, known as the Renewable Fuel Standard, or hail from states with influential constituencies opposed to the policy.

'There is concern in the Midwest that no Cabinet pick has a demonstrably pro-RFS track record and that there is no Midwestern representation in the Cabinet,” the Iowa Renewable Fuels Association said in a statement.

That's a big shift from the Obama administration. Although it came under sharp criticism for setting the biofuel mandate less than Congress intended, former Iowa Gov. Tom Vilsack - then the agriculture secretary - zealously defended the law for eight years.

The requirement for refiners to add biofuel to the diesel and gas supply dates to former President George W. Bush, who signed it into law.

By contrast, some of Trump's Cabinet picks have been openly hostile to the 12-year-old law.

For instance, Oklahoma Attorney General Scott Pruitt, the president's pick to lead the Environmental Protection Agency, which administers the requirements, has called them 'unworkable.” In 2013, he filed a legal brief with counterparts from Alabama and Virginia backing an oil industry lawsuit challenging the EPA's approval of a gasoline blend containing 15 percent ethanol. And in a news release that same year, he implored federal regulators 'to correct this flawed program.”

Pruitt struck a different tone in his Jan. 18 confirmation hearing, when Corn Belt lawmakers pressed the nominee to back the RFS. While they exacted a pledge from Pruitt to honor Congress's intent in creating the biofuel mandates, he did not rule out an administrative change in the structure of the program that has been urged by Valero Energy Corp., the largest independent U.S. refiner, and billionaire Carl Icahn, a regulatory adviser to Trump.

Democratic Sen. Tammy Duckworth of Illinois was skeptical of Pruitt's bid 'to reassure pro-RFS states by repeating a nice-sounding but ultimately vague and hollow mantra” about enforcing the standard, since the law gives the EPA 'considerable discretion.”

The EPA has wide power to set biofuel quotas, even waiving minimums set by the law.

'As EPA administrator, you could still technically be compliant with Congress - with the law - but actually be working against it,” Duckworth told Pruitt.

Former Texas Gov. Rick Perry, tapped to lead the Energy Department, asked the EPA to waive half the quota that would be fulfilled by traditional, corn-based ethanol in 2008, arguing the mandate was spiking grain prices and hurting livestock producers. Perry made a similar waiver request four years later, when a drought devastated crops in the Midwest.

Trump's pick to replace Vilsack at the Agriculture Department, former Georgia Gov. Sonny Perdue, hasn't publicly opposed the RFS. But his state is the nation's leading poultry producer - the only industry that matches Big Oil in its opposition to the biofuel requirements due to a belief that it drives up the cost of feed.

Chuck Grassley, Iowa's longtime Republican U.S. senator, said during a visit last week to Central City that he has met with Pruitt and Perry and that's he's not worried - 'they both support the RFS.”

Grassley said he also was arranging a meeting with Perdue.

None of three has yet been confirmed by the Senate to the Cabinet.

Icahn, who owns a majority stake in independent refiner CVR Energy Inc., is lobbying the government to change the way the program is structured, by shifting the compliance burden away from refiners toward fuel blenders.

Leading biofuel trade groups oppose the move, arguing it would undermine the law.

The American Petroleum Institute is pushing Congress to repeal or overhaul the RFS, though it remains a tough lift politically.

'The administration is trying to appoint these oil people and they're going to pick our pocket now on renewable fuels, which is really the key to our ag industry,” Lyle Hodde, a corn farmer from Sidney, said on a Jan. 17 conference call with reporters, organized by the Progressive Change Campaign Committee.

The Trump transition team and new administration did not respond to requests for comment.

Thomas Cape, a senior analyst and head of energy policy research at Evercore ISI in New York, said he expects Pruitt to be confirmed and shift the point of obligation within his first 100 days on the job.

Trump expressed support for the RFS on the campaign trail, including while stumping in Iowa. Just two days before he was elected, during a Nov. 6, 2016, campaign event in Sioux City, Trump pledged 'we're going to protect corn-based ethanol.”

The ethanol industry is making sure Trump doesn't forget. In the week leading up to Trump's inauguration, trade groups aired cable television ads featuring his promise to protect the RFS and touting jobs it supports.

'It's not the Pruitt administration or the Perry administration,” Bob Dinneen, president of the association, a Washington-based trade association, said by phone. 'It is the Donald Trump administration, and until proven otherwise, I'm going to accept that his strong support for the RFS specifically and ethanol, generally, is going to be there.”

Growth Energy, a Washington-based ethanol lobby group, is 'confident” Trump's Cabinet picks are 'fully aware of his vocal support” for the mandate, Emily Skor, the group's chief executive officer, said in a statement.

Still, Trump's Cabinet appointees have spooked some biofuel producers who wonder if the president will maintain that same commitment now that he's in the White House. Iowa's renewable fuel group wants Trump to tap biofuel backers in the next round of agency leadership appointments, particularly within EPA, to ease 'worries being expressed privately in many ag circles.”

'There's not people looking to jump off the grain bin, but it's like ‘Jeez, when are we going to get somebody?'” Monte Shaw, executive director of the Iowa Renewable Fuels Association, said by phone.