A tentative deal on U.S. biofuel policy struck at the White House will allow year-round sales of higher-ethanol gasoline in exchange for a policy change that could rein in compliance costs for refiners.
Senator Ted Cruz, a Republican from Texas, who has been pushing for that refiner relief, praised the "terrific final decision" in a post on Twitter following the White House meeting Tuesday, saying the agreement offers "E15, year-round plus RINs for all exports."
"This is a WIN-WIN for everyone. More corn will be sold (good for farmers), plus lower RINs (saves blue-collar refinery jobs), plus more ethanol exports (good for America)," he wrote.
Participants in Tuesday’s summit -- the seventh meeting of its kind -- included President Donald Trump as well as Republican Senators Cruz, Pat Toomey of Pennsylvania and Chuck Grassley and Joni Ernst of Iowa. EPA Administrator Scott Pruitt and Agriculture Secretary Sonny Perdue were also in the session.
Refiners’ concerns generally center around the cost of compliance credits, known as renewable identification numbers, or RINs, that they use to prove they have satisfied annual biofuel quotas.
RINs tracking 2018 ethanol consumption targets tanked as much as 19 percent to 25 cents, before recovering to about 32 cents, according to broker data compiled by Bloomberg.
Grassley said the meeting resulted in an agreement to sell E15 gasoline year round and no cap on compliance credit costs, but he suggested any change on exports would come only after further negotiation between Pruitt and Perdue. "Need to see Perdue+Pruitt plan," Grassley said in a tweet, adding: "Devil in details."
According to Cruz’s account, the White House reiterated the administration’s support for a policy change that would enable year-round sales of gasoline containing 15 percent ethanol. That E15 gasoline, as it is known, currently can’t be sold during the summer in some areas where smog is a problem. Trump outlined a plan to lift the summertime restrictions on E15 sales last month, but farm-state senators have complained that the Environmental Protection Agency hasn’t moved fast enough to make the change.
Top Trump administration officials also agreed to pursue a policy change that would allow refiners to trade in RINs tied to exported biofuel. The scheme would be developed by Perdue and Pruitt, and there was no agreed timeline for when the change might be implemented, said a person familiar with the White House deliberations.
Negotiators did not agree to any kind of cap on RIN costs, including a plan for an ethanol waiver credit previously floated by Cruz.
Under current policy, RINs must be retired when the underlying biofuel is exported. Allowing RINs associated with exported biofuel to count toward domestic quotas would effectively expand the pool of available compliance credits, potentially lowering their price.
That would mark a shift in administration policy on the issue. Last October, Pruitt backed off of a proposal from some refiners to allow exported biofuels to count toward domestic quotas. Valero Energy Corp., PBF Energy Inc., and other refiners had advanced the export idea, arguing it would boost ethanol demand while tamping down compliance costs.
Grassley used Tuesday’s meeting to complain the EPA is too liberally granting refiners exemptions allowing them to ignore biofuel quotas, without reassigning the waived quotas. The practice effectively undercuts a nationwide quota to use 15 billion gallons of conventional biofuel, typically corn-based ethanol, Grassley told reporters Tuesday.
During the White House meeting, Pruitt expressed his willingness to reallocate the exempted quotas, the person said.
Ernst offered a positive outlook after the meeting: "We’re headed in the right direction," she said.
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