WATERLOO — Farmers are dealing with yet another blow to their already unstable markets. Recent exemptions for oil refineries to the nation’s biofuel law are slashing demand for crops used in biofuels, leaving some farmers fuming.
On Aug. 9, the EPA approved 31 waivers for small refineries that can prove they are in financial trouble. The exemptions allow the refineries to forgo ethanol blending and free them from requirements made by Congress to use ethanol in transportation fuel.
Mark Recker, a corn and soybean farmer near Oelwein, said between the U.S.-China trade war and the increasing exemptions, he doesn’t remember a time in his farming history when he was more frustrated.
“It’s beyond belief this continues to go on,” Recker said. “There’s a lot of frustration out here in the countryside with the administration.”
The EPA has not released the names of the refineries receiving the exemptions, which has angered many because some are owned by huge companies like Chevron, CVR, ExxonMobil, HollyFrontier, Marathon, Phillips 66 and Valero.
“It’s a little suspect that their parent companies are making good money,” Recker said. “The fact they’re eligible to get these waivers is beyond me.”
Many farmers and lobby groups like the Iowa Corn Growers Association and Iowa Soybean Association see it as a government bailout for the oil industry, saving it hundreds of millions of dollars while undercutting ethanol and renewable fuels at a time farmers already are suffering from trade tariffs and low prices.
The changes come under EPA Administrator Andrew Wheeler, a former coal industry lobbyist.
“They have a lot of influence in this administration, and I think we’re feeling that right now,” he said.
Ethanol has been a major boon to the Iowa economy, according to Recker.
Ethanol blended into almost all gasoline in the U.S., and Iowa leads the nation in ethanol production at nearly 400 million gallons. The industry accounts for more than $5 billion of Iowa’s economy and generates $2.5 billion of income for Iowa households, according to the IRSF.
Ethanol can be found in more than 98% of gasoline in the U.S., according to the Alternative Fuels Data Center. The most common blend is E10, which is 10% ethanol and 90% gasoline.
“When you consider the whole industry, we’ve lost about 4 billion gallons of ethanol demand over the past three years, which equates to a corn loss demand of about 1.5 billion bushels,” Recker said.
In Iowa, the No. 1 corn-producing state in the country, nearly 40% of the crop is turned into ethanol. The ethanol market has remained stable with the Renewable Fuel Standard, created by Congress in 2005 and mandating transportation fuel sold in the United States must contain a minimum amount of fuels that come from renewable sources like ethanol. The goals of the RSF were to help expand the nation’s renewable fuels sector, reduce greenhouse gas emissions and reduce reliance on oil imported from other countries.
But an increase in refineries given a pass from following the law is cutting ethanol demand by an estimated 2.6 billion gallons since President Donald Trump took office, according to the Iowa Renewable Fuels Association.
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The EPA retroactively approved 19 waivers for 2016, then 35 for 2017 and 54 since 2018. Between 2013 and 2015, the EPA granted only eight.
“It takes away opportunities and acts like a weight on prices, keeping them down, and impacts long-term growth of the ethanol industry,” Recker said.
At least 15 ethanol plants have been shut down or idled since the increase in waivers.
One of Iowa’s top producers of biofuels, POET Energy, scaled back ethanol production after the latest round of exemptions. The company operates seven biofuels plants in Iowa. It is closing one ethanol plant in Indiana, but said the largest drops in production will occur in Iowa, according to the IRFA. Overall, it is reducing corn processing by 100 million bushels. The IRFA says with today’s market price, that’s $363 million less dollars going to farm families.
Last month, Plymouth Energy, an ethanol plant in northwest Iowa, shut down due to low demand for ethanol. Corn Plus, an ethanol plant in Winnebago, Minnesota, shut down Wednesday. The Renewable Fuels Association says the closures have affected more than 2,500 jobs.
“With the recent approval of 31 waivers for 2018, it is imperative that we fully understand how EPA is reaching these conclusions despite (the Department of Energy’s) viability analysis,” wrote U.S. Rep. Abby Finkenauer, who represents the 20-county Northeast Iowa 1st Congressional District.
Finkenauer and U.S. Rep. Dave Loebsack, who represents the 24-county southeast Iowa 2nd District, are calling for the Government Accountability Office to investigate how the waiver program is being applied under the Renewable Fuel Standard.
Republican U.S. Sens. Chuck Grassley and Joni Ernst also have criticized the waivers.
“The Trump administration’s approval of 31 refinery exemptions from the Renewable Fuel Standard is just devastating news for our industry,” said IRFA Executive Director Monte Shaw on the group’s website. “With this action, President Trump has destroyed over a billion gallons of biofuel demand and broken his promise to Iowa voters to protect the RFS. The vast majority of these exemptions are not justified under the law.”
Soybean oil is also used as a biofuel, and soybean farmers have leaned on the biofuels industry lately because of the loss of their No. 1 buyer, China, due to the trade war. Soybean farmers are facing another 5% tariff implemented today — putting current tariffs against U.S. soybeans at 30%.
In a sternly worded letter delivered to President Trump, Iowa Soybean Association President Lindsay Greiner said the EPA — with the administration’s approval — is well on its way to destroying nearly 2.5 billion gallons of demand for biodiesel and renewable diesel.
“Farmers need markets, plain and simple,” wrote the Keota farmer in the letter. “Unfortunately, RFS exemptions are providing refiners with more economic windfall at the expense of the biodiesel and renewable diesel industries and U.S. farmers.
“Policy challenges imposed by your administration are forcing biodiesel producers to shut their doors and lay off workers,” Greiner added. “It’s becoming more difficult to understand why you’re choosing to support higher profits for oil companies instead of providing some stability for farmers.”
Recker said a conclusion to the trade war would brighten prospects for Iowa farmers.
“The more this goes on the more permanently we’re losing these markets. We need the administration to step up and reallocate the gallons that we’ve lost and be able to put those gallons in to the market place,” he said. “It will be a major hit if this continues.”