--:-- Sean Rameswaram: Support for this podcast comes from KiwiCo. They make projects that are designed to spark creativity, tinkering, and learning in kids of all ages. They'll send them right to your door or the door of a kid that you want to get a KiwiCo crate for.
--:-- Sean Rameswaram: Right now, KiwiCo is offering today's Explained listeners a chance to try them out for free at KiwiCo.com slash Explained.
--:-- Sean Rameswaram: Friday, August 9th, 2019. And it's a fairly quiet-ish August D.C. afternoon. And I get a phone call from one of my sources saying I should be expecting something on small refinery waivers. And it's around 2.33. And I'm like, when? Today is about to end. The week is about to end.
--:-- Sean Rameswaram: And he's like, stay put. Don't go to that happy hour. I'm like, great, fantastic.
--:-- Sean Rameswaram: Humeyra Pamuk covers energy for Reuters, and she'll be the first to tell you that it's not the most breakneck beat in journalism, which made this call all the more out of the ordinary.
--:-- Sean Rameswaram: So I start making calls, and then the decision comes, and all hell breaks loose. Statements from corn states, lawmakers, trade groups, industry groups start raining on me, criticizing, slamming this decision.
--:-- Sean Rameswaram: Mind you, some of these groups are like completely pro-president. They're mostly Republican. And these statements are fuming.
--:-- Sean Rameswaram: A few weeks ago, the Environmental Protection Agency decided it would allow 31 oil refineries to bypass a requirement to mix a certain amount of ethanol into their fuel.
--:-- Sean Rameswaram: As you might know, ethanol is a biofuel mostly made from corn. The more ethanol refiners add into their oil, the more farmers get to move their product.
--:-- Sean Rameswaram: I remember hearing the president say that he's the best thing to ever happen to farmers. As a matter of fact, that's a joke. He's creating problems that are hurting our farming community.
--:-- Sean Rameswaram: They screwed us when they issued 31 waivers, compared to less than 10 waivers during all the Obama years.
--:-- Sean Rameswaram: And we thought that was bad. But guess who's not crazy about ethanol? Our message to our investors was it's a good time to be Chevron. Our portfolio is stronger than it's ever been, and you don't have to look any further than the Permian to see that.
--:-- Sean Rameswaram: ExxonMobil shares are trading higher right now following the company's quarterly report. Earnings of 73 cents a share beat expectations of 66.
--:-- Sean Rameswaram: It's oil versus ag. And whoever wins, it's going to be a big drag for the president.
--:-- Sean Rameswaram: Corn farmers and oil industry have been in a dispute for quite some time now over the nation's biofuel policy.
--:-- Sean Rameswaram: It's fair to say that the battleground has gotten extremely intensified over the past couple of months over what we call renewable fuel standard, which is the federal policy which requires oil refiners to blend biofuels like biodiesel or corn-based ethanol into their fuel pool.
--:-- Sean Rameswaram: Within this policy, there is a program called Small Refinery Waiver Program. So if an oil refiner says, complying with the Renewable Fuel Standard, RFS, is causing me a lot of financial burden, and if they can prove to Environmental Protection Agency that it's causing them financial trouble, they could be given a waiver.
--:-- Sean Rameswaram: What President Trump has done recently is he has gave the green light to EPA to issue 31 oil waivers to refiners.
--:-- Sean Rameswaram: And this has really, really upset corn farmers because what they're saying is like the more you give waivers, the more you're cutting demand for our product.
--:-- Sean Rameswaram: And our product is corn-based ethanol.
--:-- Sean Rameswaram: OK, so we've got these fuel standards that require oil companies to use biofuels better for the environment, good for farmers.
--:-- Sean Rameswaram: But the government hands out waivers. And under Trump and the EPA, they just handed out a bunch of them.
--:-- Sean Rameswaram: And now a bunch of corn farmers are mad. They've already been suffering from trade wars. They've already seen their export markets disappear because of the trade war with China.
--:-- Sean Rameswaram: They've already been struggling with an extremely low-priced environment. So renewable fuel standards, like the nation's biofuel policy, is one of the key things that still gives them some sort of a market.
--:-- Sean Rameswaram: So President Trump trying to take that away from them has really, really upset American farmers.
--:-- Sean Rameswaram: How many of these waivers is the federal government usually handing out?
--:-- Sean Rameswaram: It's important to remember that during Obama times, you could say maybe the total was less than 10, or within a calendar year, you would be looking at half a dozen.
--:-- Sean Rameswaram: However, since Trump administration came to power, they have significantly expanded this waiver program and pretty much granted a waiver to whoever applied.
--:-- Sean Rameswaram: You've got like ExxonMobil plants, Chevron plants, or facilities and refineries by Carl Icahn applying for these small refinery waivers and actually getting them
--:-- Sean Rameswaram: And obviously this has caused a backlash
--:-- Sean Rameswaram: So what happened was President Trump did not know about this in this detail up until June
--:-- Sean Rameswaram: In June he went to Iowa to council bluffs to actually unveil this policy called E15.
--:-- Sean Rameswaram: E15 is a higher blend ethanol gasoline. By fully embracing E15, we will reduce dependence on foreign oil by up to 250 million additional barrels every single year.
--:-- Sean Rameswaram: I mean, quite simply, it means more energy. And what can be wrong with that? And it's very good energy.
--:-- Sean Rameswaram: He's meeting and speaking with farmers and he's expecting nothing but gratitude.
--:-- Sean Rameswaram: However, their gratefulness comes with a caveat. He speaks to the farmers and they keep complaining about this small refinery program.
--:-- Sean Rameswaram: And he's confused and he calls USDA Secretary Sonny Perdue and EPA Administrator Andrew Wheeler and he says, what is this?
--:-- Sean Rameswaram: And he finds out that these small refinery waivers are given to the likes of Exxon and Chevron.
--:-- Sean Rameswaram: And he tells them to fix this.
--:-- Sean Rameswaram: And how are they supposed to do that?
--:-- Sean Rameswaram: Now, he does not really specify how.
--:-- Sean Rameswaram: So these two agencies, along with Department of Energy, start meeting and brainstorming among each other.
--:-- Sean Rameswaram: While corn lobby and oil lobby start their own work to push for their own argument as well.
--:-- Sean Rameswaram: And this decision to grant 31 small refinery waivers to refineries, including ones owned by ExxonMobil, I can't imagine anyone considering them small.
--:-- Sean Rameswaram: Is this the EPA's way of saying that it's just not that into this renewable fuel standard? RFS?
--:-- Sean Rameswaram: So this is like a more than a decade old federal policy.
--:-- Sean Rameswaram: What it basically does is at the time of inaction, they said, okay, let's put this policy in place to reduce U.S.'s dependence on foreign oil.
--:-- Sean Rameswaram: And then at the time, the idea was to replace fossil fuels with more environmentally friendly fuels.
--:-- Sean Rameswaram: And at the time, biofuels were just the ideal alternative to that.
--:-- Sean Rameswaram: And also to create a market for American farmers.
--:-- Sean Rameswaram: Within the past decade, over the past 12 years, there has been a lot of research emerging about maybe corn-based ethanol is not, after all, that environmentally friendly because it takes up a lot of nutrients.
--:-- Sean Rameswaram: It's extremely intense sort of production process takes a lot out of the soil.
--:-- Sean Rameswaram: There has been a lot of land conversion to cropland.
--:-- Sean Rameswaram: There's just a lot of research out there now that says that this is not necessarily as environmentally friendly as we thought a decade ago.
--:-- Sean Rameswaram: So there seems to be more question over whether RFS going forward should stay as it is right now.
--:-- Sean Rameswaram: Does the president care whether whether this biofuel is as environmentally sound as previously thought? Is that his motivation here?
--:-- Sean Rameswaram: No, that wasn't his motivation.
--:-- Sean Rameswaram: President Trump is facing a very, very difficult choice over the biofuels policy.
--:-- Sean Rameswaram: Both oil and corn are super important constituencies because they are important for Iowa.
--:-- Sean Rameswaram: Obviously, ethanol is one of the most important things for Iowa, But oil and refining industry has also been a supporter of president, and it's an important constituency for him.
--:-- Sean Rameswaram: He cannot just forget about them and be favorable to American farmers.
--:-- Sean Rameswaram: So he has been sort of trying to strike a balancing act.
--:-- Sean Rameswaram: But because of the nature of this policy, it is extremely difficult to make both sides happy at the same time.
--:-- Sean Rameswaram: I mean, all the Democrats just descended on Iowa. They were mostly eating deep fried foods, as far as I can tell.
--:-- Sean Rameswaram: Did this come up? Several Democratic candidates sort of, when they're unveiling their agriculture policy, I was seeing that they have started dedicating a couple of paragraphs on small refinery waivers and the renewable fuel standard.
--:-- Sean Rameswaram: Amy Klobuchar had an event and she said that at most there should be like just a few.
--:-- Sean Rameswaram: It should not be handed out the way it is being right now by this administration.
--:-- Sean Rameswaram: This means standing up to the big oil companies when it comes to climate change.
--:-- Sean Rameswaram: And it also means standing up to the big oil companies so you don't grant them a bunch of waivers from the renewable fuel standard behind closed doors.
--:-- Sean Rameswaram: Joe Biden tweeted our Reuters story and basically came in defense for the farmers.
--:-- Sean Rameswaram: And he said in his tweet that he's not going to sell American farmers to the highest bidder.
--:-- Sean Rameswaram: This is effectively a political story.
--:-- Sean Rameswaram: It will come to more center stage because of the election and because of the Iowa primary.
--:-- Sean Rameswaram: No politician can dare trash talk biofuels and ethanol in Iowa.
--:-- Sean Rameswaram: So the tug of war between these two industries which are two super important constituencies is just going to intensify going forward
--:-- Sean Rameswaram: In a minute, we head to the heartland to find out how all of this is sitting with farmers and the ethanol industry.
--:-- Sean Rameswaram: Hello? Hello, is this Aria?
--:-- Sean Rameswaram: Hey, Aria. My name is Sean. I spoke with your mom last week, and she told me she had just got you hooked up with KiwiCo.
--:-- Aria: Yes. That's what. What was the KiwiCo crate that you got in the mail?
--:-- Sean Rameswaram: It was, uh, I built it together.
--:-- Aria: Seriously, look at this claw. Your mom told me about it. It's like one of those claws you find in, uh, like an arcade where you drop the claw and pick up fun prizes.
--:-- Sean Rameswaram: Anyway. What color is the claw?
--:-- Sean Rameswaram: And I hear, like, it picks up little yarn balls.
--:-- Sean Rameswaram: Did you like building this claw?
--:-- Sean Rameswaram: What was the best part?
--:-- Aria: It's the yarn that you pick up.
--:-- Sean Rameswaram: You sound like a very satisfied customer.
--:-- Sean Rameswaram: Do you know if your mom went to KiwiCo.com slash Explained?
--:-- Sean Rameswaram: Where you can try KiwiCo out for free. It's great for kids of all ages?
--:-- Sean Rameswaram: Okay, tell your friends for me, all right?
--:-- Aria: Oh, yeah, right.
--:-- Sean Rameswaram: Great to talk to you, Aria.
--:-- Sean Rameswaram: Great. Nice to meet you, Aria.
--:-- Sean Rameswaram: My name is Nick Bowdish. I'm the president and CEO of Elite Octane in Atlantic, Iowa and Siouxland Ethanol in Jackson, Nebraska.
--:-- Sean Rameswaram: I'm just outside of Sioux City, Iowa, 10 miles here today at our Jackson, Nebraska facility at Siouxland Ethanol.
--:-- Sean Rameswaram: So I'm watching many of our area farmers pull into our plant today and deliver their corn to our facility as I'm visiting with you.
--:-- Sean Rameswaram: So it's fair to say that you were directly affected by this announcement that the EPA, the Trump administration, would be granting more waivers to oil refiners?
--:-- Nick Bowdish: Absolutely.
--:-- Sean Rameswaram: You know, I live in a town of 10,000 people in west central Iowa, and our community is made up of a lot of different businesses that all have agriculture as their foundation.
--:-- Nick Bowdish: And so the president's decision on these 31 small refiners, it's more than just an impact on two ethanol plants.
--:-- Nick Bowdish: The impact, you know, extends down into all these rural communities that depend on a healthy agricultural sector to remain economically vibrant.
--:-- Sean Rameswaram: And I imagine you're in touch with these communities.
--:-- Nick Bowdish: What was your reaction? What was the reaction from these communities that rely on ethanol and this industry?
--:-- Nick Bowdish: People are livid.
--:-- Nick Bowdish: I think what this really is, is destroying demand for agricultural products here at home while we're dealing with the loss of numerous ag export markets all over the world.
--:-- Sean Rameswaram: Give me an idea directly how this affects your business, how this affects farmers.
--:-- Nick Bowdish: The United States consumes about 140 billion gallons of gasoline each year.
--:-- Nick Bowdish: And the Renewable Fuel Standard, the law that has been on the books since 2005 and was amended by Congress in 2007, what that law does is it sets each year the amount of renewable fuels that this nation is supposed to blend.
--:-- Nick Bowdish: And the law is very specific that the obligated parties who are responsible for doing that blending are what many people would recognize as this country's large oil companies.
--:-- Nick Bowdish: And the president's EPA has been coming in after the fact and handing out these exemptions to oil companies so that at the end of the day, the country is not being held to blend 15 billion gallons of renewable fuel.
--:-- Nick Bowdish: And you add up over the last three years with the addition of these 31 exemptions two weeks ago, we're at 4 billion gallons of renewable fuel that's been given a free pass.
--:-- Nick Bowdish: And what that represents to the farmer is over 1 billion bushels of corn.
--:-- Sean Rameswaram: Nick, help me picture a billion bushels of corn.
--:-- Nick Bowdish: Let me think about that, Sean. You might have to ask me another question.
--:-- Sean Rameswaram: I'll come back to that.
--:-- Nick Bowdish: I mean, I'm just like, I think it sounds crazy, but I don't think there's any way most people can even visualize that.
--:-- Nick Bowdish: That would be a national yield of 172 bushels an acre.
--:-- Sean Rameswaram: So you're talking about like enough corn to like cover the state of Massachusetts.
--:-- Nick Bowdish: I don't know how big Massachusetts is, but if it's 100 miles by 100 miles, then that would be...
--:-- Sean Rameswaram: I looked it up. It's 10,000 square miles.
--:-- Nick Bowdish: Is it really?
--:-- Sean Rameswaram: Yeah.
--:-- Nick Bowdish: And that just a decision two weeks ago for one third of the destruction that happened over the last three years
--:-- Sean Rameswaram: So what do you think the EPA and President Trump should have done here instead of letting all this corn pile up?
--:-- Nick Bowdish: Well, it's really not even my opinion, Sean.
--:-- Nick Bowdish: What they should have done is followed the law.
--:-- Nick Bowdish: And what the law says is that if any of those small refineries experience disproportionate economic harm, then the EPA has the authority to grant this waiver.
--:-- Nick Bowdish: But let's say that exemption amounts to 500 million gallons.
--:-- Nick Bowdish: The EPA should take those 500 million gallons and reallocate the exempted gallons over all the remaining refineries in this country so that at the end of the year, the country still blends 15 billion gallons of renewable fuel.
--:-- Nick Bowdish: So what the president and administrator Wheeler absolutely should have done and what there's still time for them to do is to simply take these exempted gallons and reallocate them to the remaining refineries in this country.
--:-- Sean Rameswaram: That's what they should have done and should do.
--:-- Nick Bowdish: There's still time to fix this.
--:-- Sean Rameswaram: How do you think it'll go over for him if he doesn't fix it?
--:-- Nick Bowdish: Well, if he doesn't fix it, I think this has become what I would consider the latest piece that's causing many of his supporters in Iowa and all over the agricultural states of the United States to step back and say, you know, we've been great patriots, as he calls us.
--:-- Nick Bowdish: But to watch this president and this administration choose these largest refinery companies the world knows at the expense of our nation's farmers, it's a step too far.
--:-- Nick Bowdish: And it's a step that many out here in rural America aren't going to stand for.
--:-- Sean Rameswaram: And so for the first time, and I think a lot of people's lifetimes that have always voted toward the Republican way, many of them are seriously considering, are the Democrats intelligent enough to pick a candidate that on rural issues, that makes it very simple for those people to decide to go a different direction for the first time in their life.
--:-- Sean Rameswaram: Do you see a candidate like that yet?
--:-- Nick Bowdish: I see elements that are certainly sticking out.
--:-- Nick Bowdish: One person that definitely comes to mind is Senator Amy Klobuchar from Minnesota.
--:-- Nick Bowdish: Senator Klobuchar has been a closely tied advocate to the agricultural industry, and I think she sees the direction that ag policy recently has headed.
--:-- Sean Rameswaram: How do you think the president got this so wrong?
--:-- Nick Bowdish: I mean, you can tell from any number of stump speeches how much he likes that farmers support him, how much he wants to support farmers back.
--:-- Nick Bowdish: And yet this decision on these waivers just flies in the face of what farmers in places like Iowa want.
--:-- Nick Bowdish: What do you think was going through his head?
--:-- Nick Bowdish: Well, I'd like to give him the benefit of the doubt when he said a week or 10 days ago that he feels misled by his EPA.
--:-- Nick Bowdish: But it's very clear in my mind, he had plenty of time to consider the issue, to surround himself with people that could talk about the details of the issue.
--:-- Nick Bowdish: And I suppose at the end of the day two weeks ago, he had to make a decision on were those factors strong enough to override a decision to continue these exemptions.
--:-- Nick Bowdish: And at the end of the day, he picked up the phone and directed EPA to hand out these exemptions.
--:-- Nick Bowdish: So I think that was a very, very, very poor decision.
--:-- Sean Rameswaram: Absolutely that could have huge political ramifications for him.
--:-- Nick Bowdish: You know the one key message that if I were sitting across from him today what I would tell him is that Mr. President you got this wrong you should acknowledge that you got it wrong and you should fix the problem because you have the authority and the time to reallocate these gallons and so that's the good thing here he can fix this problem if he wants to
--:-- Sean Rameswaram: Nick Bowdish is the president and CEO of Elite Octane in Atlantic, Iowa, and Siouxland Ethanol in Jackson, Nebraska.
--:-- Sean Rameswaram: I'm Sean Ramas-Furham, and I'm the president of Today Explained.
--:-- Sean Rameswaram: Irene Noguchi is the show's executive producer.
--:-- Sean Rameswaram: Afim Shapiro is the engineer.
--:-- Sean Rameswaram: Halima Shah, Noam Hassenfeld, Amina Alsadi, and Bridget McCarthy produced the show.
--:-- Sean Rameswaram: Will Reed's on vacation, and the mysterious Breakmaster Cylinder is behind the beats.
--:-- Sean Rameswaram: Today Explained is produced in association with Stitcher, and we are part of the Vox Media Podcast Network.
--:-- Sean Rameswaram: The moment we've all been waiting for, KiwiCo is on a mission.
--:-- Sean Rameswaram: They'd like me to tell you about it.
--:-- Sean Rameswaram: The mission is to empower kids, not just to make a project, but to make a difference.
--:-- Sean Rameswaram: And not just one type of kid, kids of all shapes, sizes, ideologies, ages.
--:-- Sean Rameswaram: KiwiCo is offering today Explained Kids the chance to try them out for free.
--:-- Sean Rameswaram: To redeem the offer and learn more about their projects, visit kiwico.com slash explained.
