Trump biofuel package delivers RFS volumes, but offers few details

4 Oct 2019 | Tim Worledge

US President Donald Trump’s much-vaunted package for the US biofuel sector amounts to a guarantee mandates will be respected in 2020 but has offered little detail on a key industry demand on how biofuel volumes lost to a controversial blend waiver scheme will be compensated for.

In a joint statement on the US Environmental Protection Agency’s (EPA) website, US Agriculture Secretary Sonny Perdue and the EPA’s Administrator, Andrew Wheeler, welcomed the agreement on promoting biofuels and called President Trump “a champion for our nation’s farmers”.

The agreement confirmed the EPA would “seek comment on actions to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020” and conceded that it “will include accounting for relief expected to be provided for small refineries.”

The EPA will also ensure “the volume obligation for biomass-based diesel is met.”

While that meets a key demand from the biofuel sector, who have argued that the overuse of a small refiners’ exemption scheme has slashed billions of gallons of biofuel demand from the Renewable Fuel Standard, it stops well short of restoring the volumes that have been lost.

It was left to an EPA official to explain separately that the new mandates would be calculated from an average volume lost to waivers over the last three years.

Corn and soybean oil futures – both staple feedstocks for ethanol and biodiesel producers – fell in the moments after the report was released, with corn futures losing over 4 cents on the December, March and May contract.

Soybean oil contracts saw broader losses as far out as July 2021, with prompt futures losing around a quarter of a cent/lb as the package lacked clear details.

“The market could have been down a lot harder,” Terry Reilly of Futures International told Agricensus.

“Traders are disappointed over the lack of details and wanted a more concrete plan. EPA stating that they are open for public comment sent a negative signal that the RFS changes could still be pending,” Reilly said.

Some biofuel sources have estimated that over 2.5 billion gallons of biofuel demand has been lost after the EPA began expanding the issuance of waivers shortly after President Trump took office.

Republican senators, members of congress and state governors calling the plan “great news” and a “big win”, while one of the biofuel industry’s primary lobby groups, the Renewable Fuels Association called it “a crucial step toward repairing the damage done... by small refinery waivers.”

The EPA issued 31 small refinery waivers in August, prompting a furious response from farm and biofuel groups who accused multinational oil companies of using a scheme intended for small, independent refiners to wiggle out of their blending obligations.

A spokesperson for the RFA said they expected the EPA to publish further details on the agreement next week.

Around 40% of US corn production goes into the ethanol grind, with the USDA estimating it will consume 138.5 million mt of corn in 2019/20.