The energy sector is a good example of how President Trump’s program of tax, trade, regulatory and energy reform works together.
President Trump is promoting America’s energy resources by withdrawing or suspending hundreds of pending regulations and removing regulatory burdens that added time and cost to pipelines and other needed projects.
The rules around pipeline permits show how energy reform and regulatory reform are intertwined.
The rules around renewable fuels show how energy and trade are connected – and President Trump fixed them this week.
After months of haggling – and the bankruptcy of an independent refinery– the president struck a deal to simplify needlessly complicated rules around ethanol, a renewable biofuel made from corn.
Let’s recap why the renewable fuel program needed to be fixed.
Back in 2007, Washington required refineries to blend ethanol with gasoline. It set a goal of burning 15 billion gallons of ethanol in automobile fuel. Corn farmers and politically powerful grain traders such as ADM and Cargill cheered. Environmentalists approved.
But the bureaucrats’ plan to boost clean-burning ethanol bumped into a couple of problems in the real world.
First, only so much ethanol can be mixed with gasoline before the fuel damages the engine. Vehicles made before 2012 can’t handle gasoline containing a high percentage of ethanol.
That limits the market for ethanol no matter what environmentalists and EPA bureaucrats would like. Nonetheless, the EPA mandated an increasing amount of ethanol be sold each year.
This leads to the second problem: the system of trading “ethanol credits” the EPA set up to track compliance with its renewable-fuel program.
As WND has reported, the EPA creates a uniquely numbered paper credit, known as RINS, for renewable identification numbers, for each gallon of ethanol that’s produced. Rather than building expensive facilities to physically blend ethanol with gasoline, small refineries would buy these RINS credits instead to meet EPA ethanol mandates.
As the government required the use of more ethanol than the market could absorb (see problem No. 1, above), demand for RINS increased, and their price skyrocketed. Small refiners were spending more on these credits than on manufacturing fuel. This was a major reason for the bankruptcy of Philadelphia Energy, an independent refiner in Pennsylvania. Independent refineries and job in the energy industry were threatened with extinction.
Instead of boosting ethanol, the EPA ended up boosting prices at the gas pump and throttling better-paying jobs for Americans.
The conventional wisdom saw this as an intractable standoff between Big Oil and King Corn, a zero-sum game in which one side had to lose.
But President Trump defied conventional wisdom once again.
He brought together all sides, Sens. Ted Cruz, R-Texas, Charles Grassley, R-Iowa, Joni Ernst, R-Iowa, Pat Toomey, R-Pa., Secretary of Agriculture Sonny Perdue and EPA Administrator Scott Pruitt, and engineered a solution that protects refinery jobs and Midwestern farmers.
As it stood, the EPA would give companies RINS credits for importing ethanol made overseas – but not for exporting ethanol made in America. In its infinite wisdom (infinitely small), Washington was actually supporting foreign producers instead of U.S. farms and industries.
President Trump changed that. Now, American ethanol that’s exported overseas will count toward the EPA’s mandated goal.
Giving RINS credits for exporting ethanol promotes the use of ethanol and promotes exports of American-made products. It will drive down the price of RINS, reducing costs for refiners and for consumers at the pump.
Trump’s deal is a win-win for farmers and refinery workers. It cuts job-killing regulations, promotes American energy and by boosting exports, and it reduces our trade deficit. All at the same time.
That’s a big deal. And an artful one.