Biofuel fight reignites in D.C. as oil industry balks at new policies

Is a newfound alliance between fossil fuel and agriculture already falling apart?

That was the question buzzing in biofuel circles when the American Petroleum Institute announced Tuesday it no longer supports a key bipartisan bill to allow higher blends of corn-based ethanol to be sold year-round across the country.

The powerful oil lobby said while it still stands behind the idea of E15 becoming permanently available at gasoline pumps, it can't back the bipartisan legislation in its current form. In a letter to congressional leaders, API listed what it sees as a raft of policy setbacks that have led to "new costs on refiners and disrupted the fuels marketplace."

"Over the past eight months, legislative, regulatory, and market developments have created a substantially different operating environment for refiners and fuel suppliers," API President and CEO Mike Sommers wrote. "These changes have led API to reassess its position and, ultimately, oppose advancement of the Nationwide Consumer and Fuel Retailer Choice Act."

Among the changes he emphasized were the Trump administration's handling of small refinery exemption requests under the Renewable Fuel Standard. A potential reallocation of biofuel gallons from SREs "disrupts established market dynamics by effectively rewarding certain small refineries that have not invested in RFS compliance while punishing those who have," according to the letter.

The news that API was no longer on board rattled the ethanol industry and farmers who grow the corn needed to make the gasoline additive. Over a year ago, API's support for the E15 measure was heralded as a giant leap in the convergence of energy and agriculture.

The two sides, which spent more than a decade at war over biofuel policy, joined forces as the rise of electric vehicles threatens demand for all liquid fuels. That partnership is now in doubt just as ethanol champions in Congress scramble to enshrine year-round E15 into federal law.

"It's very disappointing to have E15 held hostage by API due to concerns in other policy areas that are unrelated," said Monte Shaw, executive director of the Iowa Renewable Fuels Association. "We will continue to look for a path forward."

Monte Shaw (IRFA photo) After prior environmental concerns about summertime E15 sales began to fade, and many federal waivers were granted for year-round sales amid fuel supply disruptions due to weather and global conflicts, getting permanent, all-year E15 into law just made sense, according to ethanol proponents.

Supporters argue the fuel lowers greenhouse-gas emissions, bolsters national energy security and can reduce consumer costs. Further, President Donald Trump in his first term approved year-round E15, only to have it overturned by the courts.

When API came out in support of the bill, it was to avoid a two-tiered fuel system in the Midwest due to several top-corn growing U.S. states being granted permanent E15 waivers while the rest of the country was subject to rules of no summertime sales. The oil industry then took issue when some states opted out of the waivers, leaving companies holding the bag on costly investments  to upgrade infrastructure to accommodate the change.

Another thorny issue for the oil industry is the new tax law championed by Trump and fellow Republicans in Congress that makes fuel made from foreign feedstocks, like Asian used cooking oil or Brazilian tallow, ineligible for the new 45Z tax credit. And a proposal from EPA seeks to discourage the use of fuel ingredients from outside North America as U.S. farmers face low crop prices and in some cases plummeting demand amid Trump's tariff wars.

Mike McAdams, president of the Advanced Biofuels Association, a trade group with members including ExxonMobil and Chevron, said the API's shift in position shouldn't be a surprise.

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"When the ag side overplays their hand, they should expect pushback," McAdams said. "Sticking your major customer with all the cost is never equitable or a good strategy."

Meanwhile, a possible silver lining is that API says it wants to work with lawmakers to find a "balanced" approach on E15. That could speed up negotiations over the legislation, even as lawmakers grapple with how to end a government shutdown.

The office of Sen. Deb Fischer, R-Neb., noted that API made clear in its letter that it still backs year-round E15, which is also supported by the Trump administration.

The senator is among the lawmakers saying E15 access is crucial to opening up new markets to American farmers at a time when low crop prices, soaring production costs, excess supply and Trump's tariff wars are all conspiring to create worry about the future of U.S. ag. More than a third of the U.S.'s annual corn harvest is used for making ethanol.

"It's disappointing to see some fissures developing in that relationship," Renewable Fuels Association President and CEO Geoff Cooper said in an interview. "But at the same time, we are encouraged by the fact that API appears to remain open to finding some solution."