A new plan released by the Trump Administration on Friday which was short on details, or an explanation of how it would work promises to restore the demand for ethanol that has been lost due to waivers granted to oil refineries.
The Environmental Protection Agency has granted a total of 85 waivers to oil refineries in the last three years, including 31 in August, allowing them to avoid regulations that require them to blend ethanol into the fuel supply under the Renewable Fuel Standard.
Ethanol plants around the country have been halting production or closing their doors because of the lack of demand for their product. This hits farmers even harder, who are already struggling to sell their commodities due to the trade war with China.
The effects have been felt locally.
Bill Pracht, CEO of East Kansas Agri-Energy, based out of Garnett, said the announcement should help the industry out in the long term, but there is no immediate relief in sight.
There arent really any details, but President Trump told the EPA that they have to follow the rules. They have to get back to using 15 billion gallons of corn-based ethanol per year, which is what we produce here in Garnett. So it should help us, Pracht said.
Under Scott Pruitt (former EPA administrator) and now Andrew Wheeler, the EPA and the Trump Administration have been ignoring the rules. This has been the roughest one-and-a-half year economical stretch we have had since the drought of 2012. Time will tell. It has been smoke and mirrors so far. But since this has been announced there has been no change in ethanol or corn prices.
A press release by the EPA said it will ensure that more than 15 billion gallons of conventional ethanol will be blended into the nations fuel supply beginning in 2020, and that the volume obligation for biomass-based diesel is met. This will include accounting for relief expected to be provided by small refineries.
Refineries that produce less than 75,000 barrels of oil per day have been eligible for waivers. Before, smaller refineries had to purchase renewable identification numbers. With the waivers being granted, the small refineries do not have to purchase the credits.
Pracht said his company has slowed production based off the amount of late corn planted locally and because of the lack of demand.
The waivers have affected us tremendously. They have cost us 4 billion gallons worth of demand in the last three to four years, Pracht said. That makes it very hard for this industry to overcome. The RFS (Renewable Fuel Standard) shows they are supposed to blend 15 billion gallons of corn ethanol into the nations fuel supply, but they have been getting away with 13.5 billion each year.
Two years ago we were doing pretty good, because refineries received steep fines (purchasing the credits) if they didnt meet the regulations. But now, the fines are so small they dont even feel them. They just pass it off to consumers by charging more for fuel.
Kansas produces the ninth most ethanol in the country, at 541 million gallons per year. Iowa and Nebraska produce 40 percent of the nations ethanol supply. The two states have a capacity of 6.5 billion gallons.
Coming up on an election year, farmers were convinced the president needed to get something passed in the form of trade agreements or by increasing ethanol production, if he wanted any shot at their vote in 2020. Until Friday, large oil and gas companies were the ones receiving the benefits of the waivers, while farmers and ethanol producers were being dinged from every angle.
In the EPAs release, Wheeler was quoted saying, President Trumps leadership has led to an agreement that continues to promote domestic ethanol and biodiesel production, supporting our nations farmers and providing greater energy security. Todays agreement is the latest in a series of steps we have taken to expand domestic energy production and improve the RFS program that will result in sustained biofuel production to help American farmers.
Pracht believes the EPA has been giving in to the demands of large oil companies for the last three years, rather than helping out the American farmer.
