Backers of Iowa’s ethanol industry are fighting a federal government effort to exempt more small refineries from buying the corn-based fuel while also pushing Congress to offer pandemic-related aid.
U.S. Sens. Joni Ernst and Chuck Grassley, both Iowa Republicans, joined Democratic Sens. Amy Klobuchar of Minnesota and Tammy Duckworth of Illinois and 12 other senators in a letter to the U.S. Environmental Protection Agency opposing 52 new exemption requests.
Small refineries have asked for new exemptions retroactive to as far back as 2011, arguing that the requirement that they blend ethanol into gasoline was too much of a financial burden.
Ethanol is primarily made of corn. Iowa is the nation’s top producer of the grain.
Ernst is holding up a political appointment to make her point. As part of her work on the Senate Environment and Public Works Committee, which oversees EPA, Ernst is opposing deputy administrator nominee Doug Benevento, in effect blocking the nomination.
Ernst publicly criticized EPA Administrator Scott Pruitt in June 2018 before he was ousted, contending he was “about as swampy as you get here” and had broken promises to farmers. She held up an EPA air office nominee until Pruitt said in writing he would not reduce the amount of ethanol refiners are required to blend.
Court blocked EPA exemptions
The latest battle is over new exemption requests filed with EPA not long after the 10th Circuit Court of Appeals ruled the agency had overstepped its authority in granting previous exemptions.
“Iowa’s hard-working ethanol and biodiesel producers are sick of being yanked around by (EPA Administrator) Andrew Wheeler and the EPA. Our producers need certainty; until we get that, no EPA nominee is getting my vote,” Ernst said in a statement.
In their letter, the senators asked Wheeler to reject the petition requesting exemptions.
“We urge you to reject these petitions outright … These petitions should not even be entertained because they are inconsistent with the 10th Circuit decision, congressional intent, the EPA’s own guidance, and – most importantly – the interests of farmers and rural communities who rely on the biofuel industry,” the senators wrote.
The exemptions “would only worsen the unprecedented economic challenges facing the biofuels industry and the rural communities that it supports,” the senators added.
The 52 new exemptions would cover “gap years.” The refineries are asking for exemptions even though the law was intended to only offer them for a year or two, and the refineries can’t get them if they haven’t renewed them continuously, Monte Shaw, executive director of the Iowa Renewable Fuels Association said in an interview.
The exemptions would worsen an already cloudy future for ethanol plants, Shaw said.
Iowa’s ethanol plants were operating at about half capacity six weeks ago but now are 15% to 20% below normal. Even that level ranks as the lowest production of the past 20 years, Shaw said.
“We have taken steps toward normal demand,” Shaw said. “But people should not think the economic crisis is over. We are in dire need of some sort of assistance from the federal government.
“What we have seen is a direct result of the government ordering people to stay home,” reducing the amount of fuel Iowans and other Americans bought, he said.
The U.S. House considered biofuels support in the HEROES Act, but the Senate wouldn’t pass the aid, Shaw said. Grassley appealed to the U.S Department of Agriculture, and was turned away, so he had proposed assistance in legislation that could be considered as early as next week, Shaw added.
“If we don’t get a cash infusion, I do think you will see some of these plants go into bankruptcy,” Shaw said. That could lead to oil companies buying ethanol plants, which would shift profits from farmers to multinational corporations, he added.
Last month, Grassley and Klobuchar introduced legislation that would reimburse farmers for the corn they bought going back to the beginning of this year. The House had considered aid at 45 cents per gallon produced.
Oil industry ‘not easily shamed’
What the industry doesn’t need is more exemptions, Shaw said. “The oil industry is not easily shamed,” he said.
“This is so far beyond the pale of anything that is reasonable or legal. It’s a blatant attempt to circumvent the law and the court decision,” he added, referring to the 10th Circuit Court of Appeals case.
Oil interests have long fought the ethanol-blending requirement, contending it is expensive and unwarranted. Among their chief proponents is Sen. Ted Cruz, a Texas Republican and former presidential candidate.
The Renewable Fuels Association said EPA is breaking the law and threatening the Midwest economy with the move.
“EPA’s failure to comply with the recent 10th Circuit Court decision is prolonging uncertainty and exacerbating economic harm in rural America, which was already reeling from the effects of COVID-19 on the agriculture and biofuels sector,” association President and CEO Geoff Cooper said in a statement. “RFA agrees with these Senate leaders that granting “gap-year” small refinery exemptions would not only be illegal, but it would also worsen the demand destruction that renewable fuel producers have already endured at the hands of EPA in recent years.”
In a meeting Thursday of the Governor’s Economic Recovery Advisory Board, Nick Bowdesh, president & CEO of Atlantic, Iowa-based Elite Octane, said demand for ethanol dropped 45% as the COVID-19 pandemic spread in March.
The nation’s ethanol plants saw a 45% drop in demand as the COVID-19 pandemic spread, Bowdesh said. Current demand still is off 10% to 15%, but dozens of plants around the country have resumed production after temporarily closing or scaling back production. Iowa’s 41 plants saw similar drops.
Bowdesh said the production of hand sanitizers was a boon to some plants.