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Trump’s cornundrum: more subsidies for King Corn

Empower Wisconsin | Oct. 8, 2019

By M.D. Kittle

MADISON — President Trump’s efforts to appease King Corn could kill jobs and cost consumers. At the very least his administration’s proposals will lend more government supports for a massively subsidised industry.

Candidate Trump in 2016 promised not to remove the ethanol mandate while campaigning in politically critical Iowa. Now the president’s administration is proposing to boost ethanol consumption. While the move could placate Midwest farmers hit by the ongoing trade wars, flooding the market with ethanol serves to further prop up an industry that couldn’t make it without government support.

“We are deeply concerned about the Administration’s decision to, once again, play politics with our fuel system by increasing an already onerous biofuel mandate, placing greater strain on the U.S. manufacturers he promised to protect and threatening higher costs to consumers,” American Fuel & Petrochemical Manufacturers President and CEO Chet Thompson and American Petroleum Institute President and CEO Mike Sommer wrote in a joint statement last week.

Iowa is the nation’s largest producer of ethanol, contributing about 27 percent of U.S. supply.

EPA wants to ensure that more than 15 billion gallons of conventional ethanol is blended into fuel beginning in 2020, with increased mandates on biodiesel.

Calling the Trump administration’s biofuels policy “misguided,” petroleum industry officials assert the move will punish companies while forcing more E15 into the fuel supply — a fuel 70 percent of vehicles on the road were not designed to use.

The EPA’s Renewable Fuel Standard (RFS) sets the volume of biofuel that must be blended into the fuel supply, punishing refineries that don’t meet those standards. Those standards have soared from 4 billion gallons in 2005 to nearly 20 billion this year. About 16 billion gallons comes from corn, Iowa’s cash crop.

Beyond pumping more ethanol into the fuel mix, the policies could hit hard smaller refineries that have received exemptions, waiving biofuel blending obligations for financially distressed refiners.

Thompson, of America Fuel & Petrochemical Manufacturers, said the Renewable Fuels Standards have created a huge compliance cost on America’s refining industry, which supports some 4 million jobs in hundreds of communities in 33 states. For small refineries, regulatory compliance costs exceed payroll costs, Thompson said.

“We have dozens and dozens of small refiners within the membership, and they all feel like their economic viability is greatly jeopardized by high compliance costs,” he said.

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