OMAHA (DTN) -- Trump administration officials assured dozens of representatives from agriculture and biofuels groups on an Oct. 3 phone briefing the EPA would use a three-year rolling average of small-refinery exemption volumes from 2016 to 2018 to account for future waivers.

It was the reason biofuels groups endorsed the agreement.

The next day the administration announced details of the deal outlined in the phone call -- EPA would take the average of about 4 billion gallons waived since 2016, or about 1.35 billion gallons per year, and plug that into future Renewable Fuel Standard volume proposals.

"There is outrage EPA did not implement the details of the agreement," Iowa Corn Growers Association Chief Executive Officer Craig Floss said during a news conference on Wednesday.

"No more Iowa nice; now it's Iowa pissed."

The agency announced a supplemental proposal on Tuesday that calls for accounting for 770 million gallons annually in expected exemptions. That number falls far below the average annual gallons exempted from 2016 to 2018. In 2016, EPA granted exemptions on 790 million gallons. In 2017, the agency waived 1.82 billion gallons, and in 2018 it waived 1.43 billion gallons.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said he was on the call.

"In the briefing they told us specifically how they were going to return integrity to the RFS," he said.

"They would use a three-year rolling average. It is a pure math formula. Hearing that mechanism was the key to us getting behind that number. But EPA replaced certainty with broad EPA flexibility. We're being told that instead of having a deal struck, we have to rely on the good faith of the EPA."

Since EPA announced 31 new exemptions this summer, Shaw said it was the final nail in the coffin for many biofuels companies.

In Iowa alone, four ethanol and biodiesel plants have stopped production. Biofuels plants around the country have announced closures or production cutbacks, citing the latest round of exemptions issued as a reason.

"Seventy percent to 75% of ethanol plants in the U.S. started burning cash," Shaw said. "The deal was finalized and the deal was explicitly detailed to us. Without the specific commitment we wouldn't have supported it. It's the EPA that's reneging on the deal. You could almost hear a sigh of relief on that call."

In the proposal, EPA reverses course on the idea of granting partial exemptions to small refineries. The U.S. Department of Energy has recommended to EPA the possibility of doing that, but the EPA has rejected it until now.

EPA indicates in its latest proposal it may consider granting partial waivers, as a way to assure statutory obligations are met to blend 15 billion gallons of conventional biofuels such as corn-based ethanol and other RFS volumes.

The proposal, however, gives EPA wide flexibility in how it implements the waivers program.

Administration officials, however, made clear the formula used would calculate the three-year rolling average, Shaw said.

Grant Kimberly, executive director of the Iowa Biodiesel Board, said the EPA has since 2015 wiped out 550 million gallons of biodiesel demand nationally through exemptions.

To put that in perspective, biodiesel plants in Iowa produced 365 million gallons in 2018.

"We are deeply concerned by this EPA proposal," Kimberly said. "(The deal) is the remedy we need to help plants reopen their doors. A full accounting of SREs was a promise. This is likely to inflict further damage to biodiesel and the farm economy."

Shaw said he's concerned the new proposal offers no assurance to other biofuels producers that currently operating plants would remain open.

The 770-million-gallon figure EPA proposed this week, Kimberly said, was at no point part of any discussions in which agriculture and biofuels groups were involved.

"The 770 million gallons was never on the table," he said. "It was never part of the deal. This is such an easy issue to rectify."

Shaw said biofuels groups are approaching the issue as just an EPA proposal subject to change.

"I'm still optimistic that he (Trump) struck a deal," he said. "With Mr. Trump a deal is a deal. As far as I'm concerned we have a deal. We are not walking away from that deal."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(BAS/CZ)

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