EPA rejects quota reductions in victory for corn farmers, ethanol producers

In a major political and regulatory win for Minnesota's corn farmers and ethanol producers, the U.S. Environmental Protection Agency has refused to grant retroactive reductions in corn ethanol production quotas sought by many oil refiners.

Waivers from government-mandated requirements to make certain amounts of ethanol have been at the center of a pitched, expensive battle between the corn and oil lobbies during much of the Trump administration.

Monday's action by the EPA denied 54 waiver requests covering 2011-2018 that refiners had sought. Another 14 retroactive requests have yet to be acted on.

The move had political overtones less than two months from the presidential election. President Donald Trump has tried to appease farmers who voted for him 2016, doling out billions of tax dollars to make up for tariffs slapped on American agricultural products after the president placed tariffs on imports from other countries, notably China.

News reports said Trump promised Republican Sen. Joni Ernst of Iowa that he would intervene in the waiver battle.

Still, opposition to the waivers was as much an agricultural issue as a partisan issue.

"I am glad the Administration came around and finally closed the door on the use of retroactive waivers," said House Agriculture Committee Chairman Collin Peterson of Minnesota, a Democrat. "Unfortunately, significant damage has already been done to the ethanol industry, and corn prices are still lagging from the billions of gallons of ethanol that have already been waived by EPA."

Republican Rep. Jim Hagedorn of Minnesota, an Agriculture Committee member, said he has worked "in bipartisan fashion to support our renewable-fuels industry. So I'm very pleased that President Trump has delivered for rural communities across southern Minnesota and the nation.

"Today's decision by EPA to deny the oil industry's attempts to circumvent the Renewable Fuel Standard through gap-year small refinery exemptions is key to the health of the biofuels and ethanol industries that help power our rural communities and economy. This is a big win for our farmers and biofuels producers!"

In a nod to oil companies, earlier efforts by the EPA increased waivers that let 85 refineries reduce ethanol production with no one making up the loss in volume. Those waivers effectively reduced the number of gallons of ethanol the country produced.

Democratic U.S. Sen. Amy Klobuchar of Minnesota said the White House was part of the problem and "shouldn't be celebrated for deciding not to further worsen the economic challenges our rural communities are currently facing."

"Even before the coronavirus pandemic, the Administration's misuse of small refinery exemptions had resulted in plant closures and slowdowns, reductions to the rural workforce, and decreases in commodity purchases," Klobuchar said.

The waiver program is designed for small refineries that can demonstrate that fulfilling their ethanol production quotas will seriously injure their businesses.

Previous EPA attempts to expand the number of waivers brought a swift and angry response from the corn lobby, as well as politicians representing states including Minnesota, where the corn industry represents one of the state's agricultural mainstays.

Minnesota corn farmers have long supported increases in the Renewable Fuel Standard (RFS), which sets production quotas for individual refineries to reach a statutory minimum gallons of ethanol produced each year.

The RFS quotas have been as high as 15 billion gallons per year.

In combination with shrinking commodity prices, tariffs in a trade war started by the administration and a 50% slowdown in vehicle use caused by coronavirus shutdowns, the waivers added to troubles in the ethanol industry.

Waivers that halted the production of billions of gallons of ethanol built up, said Minnesota corn farmer Brian Thalmann. None of them were reallocated to other oil refiners. So ethanol production could not remain at the legally required level, Thalmann added.

Big Corn squared off against Big Oil and won a legal judgment that denied hardship waivers to companies that had not received them the year before. The petroleum industry responded with requests for "gap-year" waivers dating from 2011 to 2018.

The Renewable Fuels Association, a trade group advocating for the ethanol industry, celebrated the latest EPA move and called the gap-year waiver requests "an absurd and bizarre attempt by the refineries to circumvent" the court decision.

Thalmann said the latest EPA decision "is one small step of many needed to get" the ethanol industry running like it should.

The new decision, Thalmann said, "is finally getting us back to having the law followed."

Jim Spencer • 202-662-7432