All legislators know that every action has an equal and opposite reaction. No scenario underscores this truth better than the game of give-and-take President Trump must play with two core segments of his voter bloc: farmers and the blue-collar manufacturing workers of forgotten America.
This is particularly true with the Renewable Fuel Standard (RFS), which Congress passed in 2005 in an attempt to eliminate U.S. dependence on imported oil. To create more U.S. fuel supply using less oil, the RFS says a set number of fuel gallons annually must contain biofuel, such as ethanol, an additive generally produced from corn. This issue has divided Trump’s base like few others.
Crucial battleground states with strong manufacturing bases, like Pennsylvania, point to the recent bankruptcy of Philadelphia Energy Solutions to argue that blending ethanol into the fuel supply has threatened the livelihood of their small businesses and put thousands of jobs at risk. At the same time, however, farm states like Iowa believe that the RFS’ incentivization of ethanol needs to remain in place to maintain some semblance of a level playing field.
Undertaking the delicate balancing act of appeasing these two core groups of support may seem like an impossible task, but the Trump administration has done a commendable job of it without violating any of its principles. It has done so through embracing the free market, making use of deregulation for both sides.
Trump’s Deregulatory Strategy for Small Refineries
President Trump’s EPA has prevented many of the RFS’s worst unintended consequences by issuing a steady stream of hardship waivers from the biofuel blending mandate to the small refineries that face disproportionate economic hardship from meeting its requirements. The EPA has had the authority to grant these waivers from the RFS’s inception, but this administration has used them more frequently and effectively. This has given more small refineries relief from the costly, speculative marketplace Big Oil and Wall Street have created out of the RFS, helping to open some of the market mechanisms in the energy industry that have been suppressed for the better part of two decades.
Simultaneously, Trump has kept farm states happy by similarly employing deregulation to farmers’ advantage. For example, on June 11, he traveled to Iowa to sign an executive order that rolled back red tape for ethanol producers, a move that helped corn growers without expanding the RFS or affecting the day-to-day operations of the small, independent refineries in need of relief.
Rather than express content with this significant relief the president has granted, some are now calling for the administration to scrap this balancing act altogether, giving the ethanol industry an artificial competitive advantage by stopping many of the hardship waivers it grants to small refineries in need. Shortly before signing his executive order, Trump assured them he would study the issue; however, it is critical that he look beyond their talking points to understand what is at stake.
Whether one believes that the government should force refiners to blend ethanol into the nation’s fuel supply annually is a matter of perspective, but this mandate’s effects on the small refineries tasked with ensuring America’s energy independence is not open for debate. They spend hundreds of millions annually just to comply with the RFS. Failing to assist these companies, some of which have filed for bankruptcy, would not only jeopardize the United States’s energy self-sufficiency, but could also compromise thousands of the blue-collar jobs that the president pledged to protect on the campaign trail.
Does Deregulating Refineries Hurt Farmers?
While ethanol stakeholders categorize these hardship waivers as damaging to farmers, the data overwhelmingly shows that nothing could be further from the truth. Their principle allegation—that the hardship waivers undercut demand for ethanol, which uses corn that farmers produce—has even been debunked by agricultural economists.
According to Dr. Scott Irwin, who teaches agricultural marketing at the University of Illinois at Urbana-Champaign, there is “little evidence that the aggregate blend rate for ethanol has been reduced by the [small refinery exemptions].” The only way that these waivers can be considered damaging to farmers is ensuring that the ethanol industry’s competition will not disappear due to the heavy hand of government.
In May, a federal court found nothing wrong with the Trump administration’s granting of hardship waivers. Indeed, the EPA’s characterization of “disproportionate economic hardship” is consistent with the guidance given to it by the Department of Energy (DOE), which its briefing appropriately categorized as “a high cost of compliance relative to the industry average, and an effect sufficient to cause a significant impairment of the refinery operations.”
While the president should undoubtedly continue exploring ways to assist farmers when appropriate, doing so in a way that violates core conservative principles and assaults a key part of his electoral base is not wise morally or politically. The jobs of the blue-collar workers in Pennsylvanian and Midwestern refineries are just as important to the nation as the ones of farmers in Iowa and Ohio.
President Trump should be creating mutually beneficial market solutions for both sides, not deck-rigging that props one up over the other. Here’s hoping that he stays the course and continues finding win-win solutions for everyone.