GOVERNMENT AFFAIRS – WEEK OF MAY 12, 2017

FEDERAL ISSUES
A trade agreement has been made with China on Live Cattle. This is great news for the cattle industry, which means positive news for corn, trucking, packing, etc. Dawn Caldwell did an interview locally with NTV News that has been distributed nationally.

USDA restructuring – what does that mean for you? The decision to establish an Undersecretary for Trade, which was authorized in the 2014 Farm Bill is good news! Over 95% of the world’s population lives outside of the U.S., so bolstering trade efforts is essential to the financial success of agriculture. Greg Ibach has a very good chance of being appointed to this position. Having Rural Development reporting directly to Secretary Perdue demonstrates the emphasis he is placing on rural America. Finally, the plan creates a one-stop shop for FSA, NRCS, and the Risk Management Agency.

STATE ISSUES
Speaker Scheer announced his intentions to adjourn the current session on May 23. This will be ahead of the 90-day statutory allowance. May 23 is only day 86. The Legislature took action on some outstanding items May 15 and they have a long weekend recess to allow the Governor time to act on the bills they have put before him, and return on the 23rd for final action. Since they are ending the session a few days early, it is even more unlikely anything gets done on property tax. Though conversations are happening, there isn’t a plan that can garner the 33 votes necessary to avoid filibuster and pass.

Though the Unicameral passed an $8.9 billion, two-year budget package, the Governor is reviewing it and has 5 calendar days to sign, veto in total, or line-item veto appropriations in the budget bills. The Dept. of Revenue issued their report showing that tax collections were 11.4% below the certified forecast for April.

OTHER ISSUES
NEW AG LEADERSHIP TEAM:
Perdue is building out his squad at the Agriculture Department, and Heidi Green, his new chief of staff, has done all of us a service by providing a memo with interesting biographical details about each member, including herself. Green says she grew up in Northern California but considers herself more a Georgian after moving there. Most recently she worked for Deloitte Touche. Others:

Chris Young, deputy chief of staff: He’s a “proud son” of Fitzgerald, Ga., with ties to Perdue’s gubernatorial administration in Georgia.
Julie Gordon, special assistant to the chief and deputy chief of staff: She’s described as a “lifelong Virginian” who will serve as the “primary conduit to the whole USDA team.”
Rachel Pick, special assistant to the secretary: She’s a “self-described farm girl from Iowa” who worked in Sen. Chuck Grassley’s office.
Lauren Sullivan, director of scheduling: She’s “a native and proud Marylander” who most recently worked in the U.S. Senate’s Sergeant-at-Arms office.
Bethany Hudson, deputy schedule and events and protocol officer: She “hails from North Carolina” and is identified as the go-to for booking Perdue at an internal department event.
Tim Murtaugh, director of communications: He’s a “native Pennsylvanian” who comes to USDA with a “career built on high-profile strategic communications in the public, political, and private sectors,” Green says.
Michawn Rich, deputy director and press secretary: She’s from Reno, Nev., and worked for both Republican Sens. Dean Heller (Nev.) and Rob Portman (Ohio).

Pacific Ethanol CEO Hopeful E15 Waiver Will Be in Place by Summer
2017-05-10 01:13:44 EDT

Pacific Ethanol CEO Neil Koehler said Wednesday that he’s “cautiously optimistic” the ethanol industry will receive a Reid Vapor Pressure (RVP) waiver for higher-level ethanol blends, including E15, before the start of the traditional high-demand summer driving season.

Speaking on Pacific Ethanol’s quarterly earnings call to discuss first-quarter results, Koehler acknowledged there are a number of hurdles that must be overcome before a waiver can be put in place but said such a change would be in line with President Donald Trump’s approach to regulatory matters.

“We think the prospects of that are quite possible,” Koehler said of the waiver.
“We think it’s very consistent with the new administration’s support of the Renewable Fuel Standard and increasing opportunities for higher blends of ethanol overlaid with their commitment to take away burdensome regulations that are hindering our economy.”

U.S. Environmental Protection Agency (EPA) Administrator Scott Pruitt last week said his agency is determining whether it has the legal authority to grant E15 an RVP waiver that would permit the higher level ethanol blend to be sold year- round. Without it, most E15 retail sales are prohibited from June 1 through Sept. 15.

“We’re cautiously optimistic,” Koehler said. “There’s both a regulatory path and there’s been legislation introduced in Congress, so we are being very supportive of that and doing our best to advocate.”

Pruitt’s announcement came after three Midwest senators introduced legislation in early March that would extend the RVP waiver to ethanol/gasoline blends above 10%. The measure, dubbed the Consumer and Fuel Retailer Choice Act, would “allow retailers across the country to sell E15 and other higher-ethanol/gasoline fuel blends year-round, increasing regulatory certainty and eliminating confusion at the pump, the senators said in a statement.

Koehler pointed to the rapid growth of E15 availability seen over the past year and projections for further growth as reasons for optimism. Koehler said there were approximately 650 stations offering E15 at the end of 2016, a number he said he expects will more than double by the end of this year.

Elsewhere in ethanol demand drivers, Koehler predicted 2017 exports will rise from 2016 levels “by over 20%” to 1.2-1.3 billion gal and “could end up as the highest on record.” Ethanol exports in 2016 reached 1.05 billion gal, up nearly 28% from the 2015 and 2014 totals of about 836 million gal, U.S. Census data shows. Koehler said he believes there’s a chance 2017 levels surpass the 2011 record of 1.2 billion gal.

He also expressed optimism that China could return as a strong buyer of U.S.
ethanol by the end of the year. After importing more than 179 million gal in 2016 — the third-largest destination market — China imposed 30% tariffs on U.S. ethanol, closing the arbitrage window for exports.

“China is a hard market to call,” Koehler said. “My own personal perspective is that when the price is right and they’ve drawn down their own corn stocks, we’ll see China back in the market for U.S. ethanol this year.”

On Pacific Ethanol’s advanced biofuel efforts, Koehler said the company expects to begin monetizing cellulosic biofuel (D3) Renewable Identification Number (RINs) credits from cellulosic ethanol production at its Stockton, Calif., plant beginning this month. In addition to production at its Stockton facility, in February, the company announced it would use Edeniq’s Pathway technology to enable annual production of up to 1 million gal of cellulosic ethanol at its Madera facility and expected to increase earnings by over $2 million annually.

OPIS assessed 2017 cellulosic biofuel (D3) RINs at $2.45/RIN on Tuesday.

“It is, in our view, the low-hanging fruit to get the industry into the cellulosic ethanol business from a capital and operational standpoint, and that’s why we’re looking to expand it in Madera and beyond,” Koehler said.

“Whether it’s Edeniq’s technology or some of the other vendors out there, we do feel that the conversion of corn fiber to ethanol could be much like the rapid adoption of corn oil that we saw over the last number of years.”

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