The Trump administration has lifted restrictions on the sale of higher ethanol blends of gasoline as part of its campaign promise to farmers who have been suffering from the trade war with China. Ending a summertime ban that former President Barack Obama’s Environmental Protection Agency (EPA) imposed in 2011 to reduce smog pollution, gasoline stations are now allowed to sell blends containing up to 15 percent corn-based ethanol, called E15, year-round.
The United States farm lobby has argued the restrictions on E15 hurt growers by limiting demand for corn-based fuel, without providing tangible air quality benefits. Recent research found little difference in smog risk between E15 and E10, a 10 percent ethanol blend that is already available year-round. Chief Executive of biofuel trade group Growth Energy Emily Skor said, “We estimate this one change will generate over a billion new gallons of ethanol demand in the next five years,” adding it could also boost the market for American grain by some 2 billion bushels over time.
The decision is considered a setback for the oil industry, which views biofuels as competition for its petroleum-based fuels and has threatened to sue the Trump administration. The American Petroleum Institute, which represents the American oil industry, has repeatedly said the administration lacks the authority to unilaterally lift the ban on E15 and that such a move should require an act of Congress. President and CEO of the American Fuel and Petrochemical Manufacturers trade group Chet Thompson said, “EPA has left us no choice but to pursue legal action to get this unlawful rule overturned.”
President Donald Trump has struggled to please both the oil and gas and agriculture industries, two critical constituencies in his re-election effort that have frequently clashed over biofuels. In October, he ordered the EPA to lift the summer E15 ban, cheering corn country ahead of the mid-term elections and putting the EPA on a tight deadline to complete its rulemaking ahead of the summer of 2019. As a concession to the oil industry, he also ordered the EPA to overhaul the biofuels credit market it oversees under the Renewable Fuel Standard, which requires refiners either to blend biofuels into their fuel or purchase credits.
The EPA has issued new rules to improve transparency in the market for biofuels credits that refiners must acquire under the nation’s biofuel law, but stops short of what many refiners were seeking. The EPA’s plan for credit market reform was called a “win-win” solution for the oil and corn industries, omitted several elements that the oil industry had been seeking. The plan focuses solely on improving market transparency, while dropping previous proposals like a requirement that buyers sell off excess credits, and limits on what types of traders can enter the market.