Trump says he will probably allow E15 gasoline sales all year

By Jeff Mason

WASHINGTON (Reuters) - U.S. President Donald Trump said on Thursday his administration may allow the sale of gasoline containing 15 percent ethanol year-round, something that could help farmers by bolstering corn demand.

The Environmental Protection Agency currently bans the higher ethanol blend, called E15, during summer because of concerns it contributes to smog on hot days. Gasoline typically contains just 10 percent ethanol.

"We're going to be going probably, probably to 15 and we're going to be going to a 12-month period," Trump told reporters during a meeting with governors and lawmakers at the White House. "We're going to work out something during the transition period, which is not easy, very complicated."

EPA spokeswoman Liz Bowman said earlier in the day the agency "has been assessing the legal validity of granting an E15 waiver since last summer" and is awaiting an outcome from discussions with the White House, the Department of Agriculture and Congress before making any final decisions.

The announcement comes as the White House seeks to appease both the corn and oil industries, which have been clashing over U.S. biofuels policy.

Oil refiners have complained the U.S. Renewable Fuel Standard requiring them to add biofuels into fuel is too costly while the agriculture sector has warned against any changes that would undermine ethanol demand.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the proposed shift to year-round E15 sales would be "very exciting news."

"It would be a great morale boost for rural America, and more importantly a real demand boost if it can be moved forward quickly," he said in an interview.

Shares of major biofuels producers, like Archer Daniels Midland Co, rose slightly after the announcement. ADM was up 1.5 percent at $44.78.

It was unclear, however, whether the move would help the refining sector - which has been lobbying hard instead for a cap on the price of blending credits that refiners must acquire to prove compliance with the RFS.

Refiners' shares were mixed after Trump's comments, with Andeavor down 2.6 percent at $110.20, and Valero Energy Corp up 0.3 percent to $100.63.

Greater blending of ethanol through year-round E15 sales would theoretically increase the supplies of the credits, and thus reduce prices. But at the same time, more ethanol blending translates to a smaller share of petroleum-based fuel in American gas tanks, which would hurt refiner sales.

Bids for the benchmark D6 blending credits slipped to 34 cents on Thursday afternoon, after deals were struck at 37.5 cents ahead of the announcement, a U.S. trader said.

(Additional reporting by Chris Prentice, Jarrett Renshaw and Jessica Resnick-Ault in New York; Writing by Richard Valdmanis; Editing by Steve Orlofsky and Matthew Lewis)