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March 6, 2020 2:45 PM, EST

Trump’s Biofuel Plan Triggers Political Fallout in Farm Country

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President Donald Trump’s decision to defend the U.S. government’s power to broadly exempt oil refineries from biofuel-blending requirements is triggering a backlash in Iowa and other states that are top producers of ethanol and the corn used to make it.

Nine biofuel and agriculture advocacy groups bluntly warned of possible political repercussions eight months before Election Day. If the administration follows through with plans to appeal a court ruling that invalidated three refinery waivers, it “would be viewed as a stunning betrayal of America’s rural workers and farmers,” the Renewable Fuels Association, National Farmers Union, National Biodiesel Board and other organizations said in a joint statement.

“We cannot stress enough how important this decision is to the future of the rural economy and to President Trump’s relationship with leaders and voters across the heartland,” they said.

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The anger centers around the administration’s planned response to a 10th Circuit Court of Appeals decision faulting the Environmental Protection Agency for exempting three refineries from requirements to blend biofuel into gasoline and diesel. Federal law authorizes those waivers for small refineries facing an economic hardship, but a three-judge panel said that relief is limited to refineries that have consistently won exemptions.

And producers of corn-based ethanol and soybean-based biodiesel argue the Trump administration too freely handed out the waivers, undermining a 15-year-old Renewable Fuel Standard law that mandates the use of plant-based alternatives to gasoline.

Top Trump administration officials had been planning to accept the ruling and apply it nationwide, a move that would mean just a handful of U.S. refineries — no more than seven — would be eligible for the valuable exemptions.

But Trump ordered a shift in course March 5, after a last-minute intervention by Attorney General William Barr and an intense pressure campaign by oil-state senators, including Texas Republican Ted Cruz.

Biofuel advocates were urging the White House to make another pivot March 6 and back down from the planned appeal, ahead of a March 9 legal deadline for the administration to ask the full 10th Circuit to rehear the case. The Trump administration has vacillated on biofuel policy decisions in the past, raising the possibility of yet another change in course.

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An appeal would be a victory for oil companies and their Capitol Hill allies, who argued the waivers are essential to preserve the economic health of refineries and their blue-collar jobs, especially amid a coronavirus-spurred slump in demand for their petroleum-based products. Oil industry advocates raised the specter of job losses and plant closures in Wyoming, Texas and the political battleground state of Pennsylvania.

But the appeal decision would come at the expense of biofuel producers and supporters in other politically important states — especially Iowa, which is key to Trump’s re-election. Trump launched a campaign blitz in Iowa two months ago, as he sought to shore up support in the Hawkeye State he won by 9 percentage points in 2016.

“Trump is on the verge of outraging every farm and biofuel group in the country,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “We could have had a fairly uneventful year for RFS policy heading toward November, but this action would seriously threaten Trump’s reputation in rural states.”

Oil industry advocates have argued that anything less than an appeal would be legal malpractice because the 10th Circuit’s ruling clashes with federal law that says refineries may seek relief “at any time,” conflicts with longstanding EPA practice and is at odds with a separate ruling by the 4th Circuit. A separate challenge of other refinery waivers is also pending in the D.C. Circuit Court of Appeals.

Analysts stressed an appeal is not universally bad news for biofuels, with Height noting it sets the stage for the EPA to scale back refinery relief this spring, by issuing partial waivers instead of complete exemptions. “In the president’s impossible but never-ending quest to find a win-win solution on the RFS, partial 2019 waivers would seem to be a modest concession to farm country for the appeal,” Height said in a research note for clients on March 6.

Mario Parker and Jennifer Jacobs contributed to this report.

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