Trump plans Iowa visit next week to announce pro-ethanol measure -sources

NEW YORK, Oct 2 (Reuters) - President Donald Trump is expected to visit Iowa next week to deliver on a promise to lift a summer ban on higher ethanol blends of gasoline, according to two sources familiar with the plan, aimed at helping Farm Belt Republicans in tight congressional election races.

The move would cap months of fractious negotiations initiated by the White House over ways to help the oil industry deal with the cost of complying with the nation’s biofuel laws, without angering farmers in the nation’s heartland.

Expanding sales of higher ethanol gasoline blends could help both constituencies by making it easier for the energy industry to hit annual blending quotas under the U.S. Renewable Fuel Standard, while shoring up demand for the corn-based fuel.

But the oil industry has long opposed the idea, which could cut into its market-share.

The sources, who asked not to be named, said Trump plans to visit Council Bluffs, Iowa, on Oct. 9, to announce he is directing the U.S. Environmental Protection Agency (EPA) to lift the summer ban on so-called E15 gasoline.

They said he might also tighten restrictions on the trading of ethanol blending credits to keep prices down for merchant refiners struggling with the cost of complying with the U.S. Renewable Fuel Standard (RFS).

The White House did not respond to requests for comment.

Iowa Republican Senator Joni Ernst said she was hopeful for such a visit.

“I am optimistic something is going to happen,” she said in a phone interview on Tuesday. “It would not be good for the president to hint and hint about lifting the ban and do nothing. I think there would be peril if he came and did not deliver on the promise.”

Iowa Republican Senator Chuck Grassley said he was also hoping the administration would deliver on the E15 measure.

Council Bluff sits in Iowa’s 3rd District, where incumbent Republican David Young is locked in tight race with Democrat Cindy Axne. The move could also help Iowa Republican Gov. Kim Reynolds keep the governor’s mansion ahead of a potential 2020 Trump re-election campaign.

The RFS is a 2005 law that requires refiners to blend increasing amounts of biofuels into gasoline each year or buy credits from competitors who do.

But demand growth has slowed as U.S. government mandates have capped out and Trump’s trade war with China has cut out a key export market, hurting corn farmers.

Lifting the ban on so-called E15 gasoline, a measure to reduce smog that has since been found ineffective, would motivate retailers to add pumps and grow the domestic market for ethanol. Iowa is the largest U.S. producer of ethanol.

The American Petroleum Institute opposes both the E15 waiver and the proposed trade restrictions, which the group says will hurt consumers and damage liquidity in the credit market. (Reporting By Jarrett Renshaw Additional reporting by Humeyra Pamuk; Editing by David Gregorio)