Daily on Energy: Oil and renewable industries locked in tug of war over Trump ethanol plan

E15 fuel is restricted for use during the summer months because of its high vapor pressure, which can exacerbate smog levels. But the summer months are the largest season for fuel sales, and a prime opportunity for corn farmers to sell more of their product into the gasoline supply.

President Trump had negotiated the plan as part of his promise to Iowa farmers to expand the market for corn ethanol, while also trying to reduce costs for fuel makers and refiners.

The oil industry says to scrap the plan: The American Petroleum Institute plans to lay out a case that the plan is both illegal and unnecessary, threatening to sue if the EPA moves forward with the plan under its expedited schedule of Memorial Day.

The EPA’s plan, beyond waiving the restrictions for E15, also adds a layer of regulation to govern the sale and trading of ethanol credits that oil refiners must purchase to comply with the EPA’s flagship renewable fuel program, called the Renewable Fuel Standard.

The RFS requires billions of gallons of ethanol and other biofuels to be blended in the nation’s fuel supply on an ever-increasing basis each year.

The oil industry says the credit reforms, which could raise costs for fuel producers and consumers, are completely unnecessary, despite the reforms being designed to help refiners cut costs in buying ethanol each year.

Renewable fuel industry also opposes the market reforms: Most biofuel groups plan to support the part of the plan that expands the sale of E15 year-round, but will oppose the credit trading part of EPA’s plan.

“We support EPA’s actions to enable the growth of the biofuel industry by allowing year-round sales of E15,” said Paul Winters, spokesman for the biodiesel industry’s National Biodiesel Board. “However, the proposed … market reforms are unnecessary.”

EPA has not provided evidence that the part of the credit market it is trying to fix is actually broken, Winters tells John.

The ethanol credit reforms in the plan are aimed at stopping market manipulation, which has been blamed by some in the refinery industry for increasing the price of the credits.

But reforming a system with “no evidence” of manipulation could “disrupt and even undermine” the value of the credits that refiners use to meet the renewable fuel program’s annual requirements, Winters said.

His group produces biofuels that benefit from the credit market remaining untouched. The renewable fuel sector, in general, sees the problems in the market as perpetuated by large oil companies hoarding credits to raise prices to benefit from selling them to smaller, independent refiners that make up the bulk of the sector.

Frank Macchiarola, API’s downstream director, called the market reform piece of the ethanol plan a solution in search of problem in summarizing the oil group’s comments to reporters last week.

Brian Jennings, president and CEO of the American Ethanol Coalition, a pro-ethanol group based in Iowa, told John that the industry’s comments will support the E15 provisions with some slight recommended changes in how EPA does it, while asking the administration to completely “reject” the market reforms.

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TRUMP DEBATES WAIVING JONES ACT TO SHIP NATURAL GAS: Trump is considering granting waivers to bypass the Jones Act, a century-old law law regulating domestic maritime commerce, to ease the transport of natural gas to the Northeast and Puerto Rico.

Enacted in 1920, the Jones Act prohibits tankers from hauling goods and commodities, such as oil or natural gas, between U.S. ports unless the ships are American made, owned, and crewed.

The Jones Act was designed to protect American maritime interests and shipbuilders, and the industry has repeatedly fended off attempts in Congress to repeal it. Jones Act boosters warn waivers would harm American jobs.

But some oil and gas industry officials argue the law is hampering Trump’s “energy dominance agenda” by effectively prohibiting areas of the country that lack energy resources, and suffer from high prices, from receiving U.S.-produced natural gas.

“Jones Act waivers are a commonsense solution to meet the energy needs of Americans in Northeast and Puerto Rico,” Dan Eberhart, CEO of the oil services firm Canary and a Trump donor, told Josh. “There’s no good argument for not granting waivers, except for the protests of special interest, which often win out in swampy D.C.”

For Trump, who has not decided what to do, the debate over the Jones Act presents a conflict between his instinct to loosen restrictions on infrastructure and energy development and his promise to support American jobs and traditional U.S. industries.

What’s the problem?: Supporters of waivers say there is a shortage of pipelines from gas-rich Pennsylvania to the Northeast, partly because of opposition to fossil fuel infrastructure in New York. Puerto Rico cannot be reached by pipeline.

A workaround to this problem could be using ships along U.S. coasts to transport liquefied natural gas, or LNG to the Northeast and Puerto Rico.

But there are no Jones Act-compliant tankers that can transport liquefied natural gas, so U.S. companies must turn to importing higher-priced LNG from overseas.

Read more of Josh’s report here.

BETO O’ROURKE RELEASES $5T PLAN TO FIGHT CLIMATE CHANGE: 2020 Democratic presidential candidate Beto O’Rourke released a plan Monday to combat climate change, vowing to mobilize $5 trillion in spending over 10 years to address what he called “the greatest threat we face.”

His plan calls for $1.5 trillion in “fully paid for” government spending to mobilize a total of $5 trillion in funding over a decade, to be spent on infrastructure, tax incentives, clean energy research and development, housing and transportation grants in low-income communities, and mitigation measures to help communities prepare for extreme weather events.

To help pay for it, O’Rourke says he would raise taxes on corporations and the wealthy, while ending “tens of billions” of dollars in tax breaks for fossil fuel companies.

TRUMP AND JAPANESE LEADER TALK ENERGY AHEAD OF IRAN OIL DEADLINE: Trump discussed energy cooperation with Japanese Prime Minister Shinzō Abe on Friday, just days before the United States’ May 1 deadline for ending purchases of oil from Iran.

The meeting came one day after a top Japanese oil industry official said the country is ready to comply with the U.S. ban on oil imports from Iran.

Backing away from Iran’s oil: Petroleum Association of Japan President Takashi Tsukioka told reporters that the country’s main refiners have already secured alternative suppliers to meet the May 1 deadline imposed by Washington last week for ending the waiver for importing Iranian crude oil.

Tsukioka said he expects oil supplies to remain stable even with sanctions, underscoring U.S. efforts to collaborate with Saudi Arabia and the United Arab Emirates to ensure stability and avoid price spikes.

Trump also discussed upcoming G20 in Japan: The Group of 20 summit in Osaka in June will include a two-day break out session titled “Ministerial Meeting on Energy Transitions and Global Environment for Sustainable Growth.”

UTILITY DUKE ENERGY GROWS USE OF RENEWABLES, CUTS COAL: Duke Energy, one of the nation’s largest utilities, is producing nearly 40% of its energy from carbon-free sources, the company said Monday.

Duke’s generation from renewables grew 11% in 2018, with wind, solar, biomass, and hydro equaling 9.3% of its energy mix. Nuclear makes up the majority of Duke’s zero-carbon energy.

The company, in its annual sustainability report, said its coal use fell more than 50% from 2008 to 2018, with most of it replaced by natural gas. It retired two coal plants last year.

“Duke Energy is successfully reducing our environmental impact while keeping electric prices low for customers,” said Cari Boyce, Duke’s senior vice president, stakeholder strategy and sustainability.

However, Duke’s carbon emissions were roughly flat in 2018. The company produced 2% more energy compared to the previous year.

Duke provides electricity to 7.7 million customers in six states — North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky.

A RECORD AMOUNT OF WIND PROJECTS ARE BEING DEVELOPED: Nearly 40,000 megawatts of wind are in various stages of development, the American Wind Energy Association said in a new report Friday, with eight states preparing to double their installed wind capacity.

“America’s largest source of renewable energy generating capacity is on a path to grow by 40% in the near-term,” said Tom Kiernan, CEO of AWEA.

Of the 40,000 megawatts being developed, 6,146 megawatts were announced this quarter of the year, more than the capacity of all the operational wind farms in California. Texas has the most wind under construction with 6,528 megawatts.

The Rundown

Wall Street Journal Nuclear-bailout bills in Pennsylvania, Ohio take heat over cost

Washington Post New EPA document tells communities to brace for climate change impacts

Bloomberg The fastest-growing US city is scrambling to survive the shale boom

Reuters US oil-storage industry fines soar on air, water violations

Calendar

MONDAY | April 29

9 a.m., National Rural Electric Cooperative Association hold legislative conference with FERC Chairman Neil Chatterjee, DOE Assistant Secretary for Electricity Bruce Walker, Sen. Joe Manchin, D-W.Va., and Rep. Steny Hoyer, D-Md. The conference is held April 29-30.

11:59 p.m., Deadline for submitting comments on EPA proposed rule to waive Reid vapor requirements to allow E15 fuels to be sold year round; and modifications to ethanol RIN credit market rules.

WEDNESDAY | May 1

9:45 a.m., 1300 Pennsylvania Avenue NW. American Climate Leadership Summit kicks off in Washington with panels on clean energy breakthroughs, energy efficiency, and energy storage.

THURSDAY | May 2

10 a.m., 366 Dirksen. The Senate Energy and Natural Resources Committee holds a hearing to consider the following nominations: Daniel Jorjani to be solicitor of the Department of the Interior; and Mark Lee Greenblatt to be inspector general of the Department of the Interior.