November 22, 2019 / 8:42 PM / 16 days ago

White House asks Iowa senator for input on biofuels policy: sources

NEW YORK (Reuters) - The White House has asked Iowa Senator Chuck Grassley’s office for input on the administration’s latest proposal to boost the ethanol market in 2020, according to two sources familiar with the matter on Friday, after a flurry of conversations between President Donald Trump and corn-state advocates critical of the plan.

FILE PHOTO: U.S. Senate Judiciary Committee Chairman Senator Chuck Grassley (R-IA) speaks during a news conference to discuss the FBI background investigation into the assault allegations against U.S. Supreme Court nominee Judge Brett Kavanaugh on Capitol Hill in Washington, U.S., October 4, 2018. REUTERS/Yuri Gripas

The White House request shows the Trump administration may be having second thoughts about the proposal, which the president had hoped would shore up his support in the Farm Belt, a crucial political constituency in his reelection bid, the sources said.

The Environmental Protection Agency is already due to miss a Nov. 30 deadline to finalize the proposal, which was drafted after prolonged negotiations.

“EPA plans to finalize this rulemaking this winter upon thorough review of public comments,” the agency’s spokesman Michael Abboud told Reuters.

At issue is a plan outlined by Trump’s EPA in October that was intended to ensure the administration’s expanded use of waivers freeing refineries from their obligation to blend ethanol into gasoline does not hurt farmers by cutting into U.S. demand for the corn-based fuel.

Under the U.S. Renewable Fuel Standard, refineries are required to blend 15 billion gallons of ethanol annually, but the EPA can exempt small facilities that demonstrate compliance would hurt them financially. The EPA has roughly quadrupled the number of waivers it has issued since Trump took office.

The EPA’s plan would address that by increasing the amount some refineries must blend next year, using a three-year average of the volumes that the Department of Energy has advised the EPA to waive under the exemption program.

But the corn lobby has lambasted the proposal since it was announced, saying it should instead account for actual amounts waived by the agency - since the EPA in recent years has been waiving higher volumes than the DOE advised.

According to the sources, White House economic advisor Larry Kudlow asked Republican Grassley’s office this week for an explanation of how the EPA’s use of the so-called Small Refinery Exemptions negatively impacts the ethanol industry, and how the administration’s proposal fails to provide relief.

Grassley’s office responded to the questions on Thursday, the sources said. The sources did not share the details of the response. The White House declined to comment.

It remains unclear whether the administration has any intention of adjusting the plan at this late stage.

Kudlow’s request comes after Iowa Senator Joni Ernst, another Republican and biofuels advocate, spoke multiple times with Trump on the issue in the last month.

Terry Branstad, U.S. ambassador to China and former governor of Iowa, has also met with Kudlow and Trump this week, according to two additional sources familiar with the matter.

In those discussions, Branstad expressed to Kudlow that the current EPA proposal was not what was agreed to in negotiations between the administration and biofuels supporters before it was announced, one of the sources said.

On Thursday, Grassley tweeted: “I got a briefing on China from Ambassador Branstad as well as an update on his continued advocacy w (sic) the White House on biodiesel & ethanol. As a senator from Iowa fighting this battle I thank him for his help.”

Reporting by Stephanie Kelly and Jarrett Renshaw; editing by Richard Valdmanis and Marguerita Choy

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