May 28, 2019 / 2:06 PM / 23 days ago

Democratic presidential hopeful Klobuchar proposes revamping EPA ethanol rules

WASHINGTON (Reuters) - Democratic presidential hopeful Amy Klobuchar on Saturday called for revamping the Environmental Protection Agency’s (EPA) rules governing how refineries use ethanol in gasoline products, a proposal aimed at the politically critical state of Iowa.

FILE PHOTO: U.S. Senator Amy Klobuchar declares her candidacy for the 2020 Democratic presidential nomination in Minneapolis, Minnesota, U.S., February 10, 2019. REUTERS/Eric Miller/File Photo

    Part of a series of farm policies that also addressed access to capital and bankruptcy assistance, Klobuchar, a U.S. senator, said the EPA’s waivers that allow refineries to avoid the requirements are “misguided” and said financial institutions are manipulating the biofuels credit trading market.

She called for new compliance standards and additional oversight.

Klobuchar is one of more than 20 Democrats vying for her party’s presidential nomination. If she is going to be successful, her campaign needs to galvanize support in the heavily-agriculture state of Iowa, which holds the first primary contest in the nation. Iowa is the country’s leading producer of corn, which is used to produce ethanol.

Klobuchar, who represents Minnesota, another heavily agriculture state which borders Iowa to the north, in the U.S. Senate, has been trailing in polls on the Democratic presidential field.

In a Reuters/Ipsos poll tmsnrt.rs/2LeoO8z earlier this month, she garnered support of only 1% of respondents. Former Vice President Joe Biden led the poll, with 29% of Democrats and independents saying they would vote for him in the state nominating contests that begin next winter.

The Renewable Fuel Standard (RFS) program that mandates ethanol use is a more than decade-old regulation aimed at helping farmers and reducing U.S. dependence on oil. The policy has helped farmers by creating a huge market for ethanol and other biofuels, but oil refiners say compliance is prohibitively expensive.

    Under the program, refiners are required to blend biofuels into the nation’s gasoline pool or purchase credits from those that do, but smaller refineries with a capacity of less than 75,000 barrels per day (bpd) can obtain a “hardship waiver” if they prove that compliance with RFS would cause them significant financial strain.

    The Trump administration made extensive use of such waivers in the last two years, saving refiners money but angering the corn lobby, particularly after major companies like Exxon Mobil Corp received exemptions for certain facilities.

    Ethanol mandates have opened a war between the oil and corn industries. The ethanol industry claims the exemptions have been over-used, threatening demand for corn-based ethanol at a time when farmers are already struggling.

    The policy has helped farmers by creating a 15-billion-gallon-a-year market for corn-based ethanol, but oil refiners have increasingly complained about the expense – particularly when prices are high and volatile.

    RFS and the small refinery waiver program have increasingly emerged as one of the key policy areas that several Democratic presidential hopefuls have raised.

    U.S. Senator Elizabeth Warren earlier this month in a letter to the EPA questioned the agency’s decision to grant a small refinery waiver to an oil refinery owned by billionaire Carl Icahn, who is a former adviser to President Donald Trump. She said waivers undermine the renewable program.

(The corrected story clarifies Iowa’s status as the leading corn-producing state in fourth paragraph.)

Reporting by Humeyra Pamuk and Ginger Gibson; Editing by Leslie Adler

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