U.S. President Donald Trump will meet with senators and Cabinet officials on Tuesday to discuss ways to lower the cost of the nation’s biofuels policy to oil refiners, according to sources familiar with the matter.
The meeting reflects rising concern in the White House over the current state of the U.S. Renewable Fuel Standard, a law requiring refiners to mix biofuels such as corn-based ethanol into their fuel, after a Pennsylvania refiner blamed the regulation for its recent bankruptcy.
The meeting will include Republican Senators Ted Cruz of Texas, Pat Toomey of Pennsylvania, Chuck Grassley and Joni Ernst of corn state Iowa, along with Environmental Protection Agency Administrator Scott Pruitt, Agriculture Secretary Sonny Perdue, and Energy Secretary Rick Perry, according to the sources.
The meeting will also include White House legislative director Marc Short, who will seek to ensure any agreement can be achieved through executive orders and regulatory actions defensible in court, the sources said.
Representatives for those officials, and the White House, declined to comment.
U.S. farm groups urged Trump in a letter on Monday not to weaken the RFS, calling it a critical engine of rural jobs. "Any action that seeks to weaken the RFS for the benefit of a handful of refiners will, by extension, be borne on the backs of our farmers," according to the letter.
Under the RFS, refiners must earn or purchase biofuel blending credits called RINs to prove to the federal government that enough biofuels are being blended into their gasoline and diesel to comply with the policy.
As biofuels volumes quotas have increased over the years, however, so have prices for the credits – meaning refiners that buy them instead of acquire them by blending fuels themselves are facing rising costs.
Oil refiner Philadelphia Energy Solutions (PES), which employs more than 1,000 people in a key electoral state, declared bankruptcy last month and blamed the regulation for its demise. Reuters reported other factors may also have played a role in the company's bankruptcy, including the withdrawal of more than $590 million in dividend-style payments from the company by its investor owners.
Two of the sources familiar with the agenda of the Tuesday meeting said at least four options aimed at reducing the cost of RINs to refiners like PES will be considered – though they noted the effort would be constrained by political and legal realities that have derailed previous reform efforts.
Prices of RINs tumbled by nearly 20 percent in the past week on expectations of a regulatory tweak.
One idea would be to count U.S. ethanol exports toward annual biofuels volumes mandates that are currently focused purely on domestic usage, an idea the sources said had been studied by Agriculture Secretary Perdue who now favors it.
Another idea would be to place a cap on the price of a RIN. Senator Cruz late last year suggested capping RIN prices at 10 cents each, far below the current value of over 60 cents, in a move that was roundly rejected by biofuels advocates.
The meeting will also consider measures to remove speculation from the RIN market, potentially by limiting RIN transactions to those directly involved in generating and consuming them: blenders and refiners, the sources said.
Any plan would also likely include a concession to the ethanol industry, they said, such as a waiver to allow gasoline containing 15 percent ethanol to be sold year round. Sales of high-ethanol blends are currently restricted in the summer due to concerns over smog.
The meeting could also look at solutions focused more directly on refiner PES - like waiving its current RIN obligation valued at about $350 million, the sources said. But any such move would likely draw a backlash from other refiners who have no hope of receiving such a waiver.
(Writing by Richard Valdmanis; Editing by Susan Thomas)