Decision angers Big Oil

WASHINGTON/NEW YORK, Oct 05 (Reuters): The Trump administration on Friday unveiled a plan to boost US biofuels consumption starting next year to help struggling farmers, a move that cheered the agriculture industry but triggered a backlash from Big Oil.

The plan would require an unspecified increase in the amount of ethanol that oil refiners must add to their fuel in 2020, and would also aim to remove further barriers to the sale of higher ethanol blends of gasoline like E15, the Environmental Protection Agency said in a statement.

"President Trump's leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our nation's farmers and providing greater energy security," EPA Administrator Andrew Wheeler said.

The deal is widely seen as an attempt by President Donald Trump to mend fences with the powerful corn lobby, which was outraged by the EPA's decision in August to exempt 31 oil refineries here from their obligations under the RFS. This freed the refineries from the requirement to blend biofuels or buy credits from those who do.

Biofuel companies, farmers and Midwest lawmakers complained that the waivers undercut demand for corn, which is already slumping due to the US trade war with China. Oil refiners say the waivers protect blue-collar jobs and have no real impact on ethanol use.

Senators from Iowa, the nation's biggest ethanol producing state, welcomed the move.

"The President heard that message and has acted on it" Republican Senator Joni Ernst said in a statement. "Our message was clear: uphold the RFS -15 billion means 15 billion," Ernst, who was instrumental in putting together the deal, said.

The rules, which will be finalised after a period of public comment, would "ensure that more than 15 billion gallons of conventional ethanol be blended into the nation's fuel supply beginning in 2020," the EPA said, without giving an exact number. Any changes to blending volume mandates for 2020 under the US biofuel law, the Renewable Fuel Standard (RFS), must be finalised by Nov. 30.

Before Friday's proposal, the EPA had called for the refining industry to add 20.04 billion gallons of biofuels, including 15 billion gallons of ethanol, into their fuel in 2020. The Trump administration had also already provided a boost to E15 earlier this year here by lifting an Obama-era ban on its sale during summer months.

While the move was largely welcome by biofuel groups, some industry players said they were concerned that the EPA declined to provide an exact figure for the 2020 blending quotas. A brief EPA call with reporters offered little insight, with an agency official saying only that the mandates will be based on a calculation of waived volumes over the previous three years.

Tim Gannon, a farmer from Iowa and a former official with the Department of Agriculture was skeptical.

"It is very much in question whether this gets done by 2020," he said. "Every time the President makes a promise on the RFS, his EPA administrator manages to roll it back for Big Oil... The question now is will this time be any different?"

An earlier report adds: The Trump administration is expected on Friday to unveil a new plan to boost US biofuels demand as it seeks the support of farmers in next year's election, four sources briefed on the matter told Reuters, a move likely to trigger a backlash from the oil industry.

President Donald Trump promised farmers a "giant package" related to ethanol in August after his administration angered the powerful corn lobby by exempting 31 oil refineries here from their obligations under the nation's biofuel policy, freeing them from a requirement to blend corn-based ethanol into their fuel or buy credits from those who do.

The plan here devised after weeks of meetings between White House officials and industry representatives, would make up for those waivers by increasing the amount of ethanol refiners must use in the future, and by further expanding the retail market for higher ethanol blends of gasoline like E15.